The Chinese are eating our lunch, and they're eating it off cheap cotton cloth goods with which they continue to flood our markets.
And this is more than two years after China entered the World Trade Organization and pledged to abide by the organization's rules and regulations. The first year China was to open its market to 3.75 million bales of imported cotton, but only about 6 percent of that total was actually made available under WTO-consistent terms, says Gaylon Booker, trade consultant with the National Cotton Council.
Booker, the council's president until he retired earlier this year, addressed trade issues during the American Cotton Producers and The Cotton Foundation joint meeting in Corpus Christi, Texas.
He said China improved on its trade obligations only slightly the second year and will likely not make much more progress in the third.
“China has issued new rules for WTO trade,” Booker notes. “We still don't have a reliable English translation but it appears the new rules will still fall short of full compliance. Meanwhile, they are covering us up with imported textiles.”
Booker said when the Chinese import quotas were lifted, textile imports in eight cotton-containing categories increased by 640 percent while prices were slashed 71 percent. Absence of quota costs for these categories explains some, but not all, of the price reduction. “Their intention is to destroy their competition and then set the price for textiles.”
U.S. textiles also compete against a Chinese currency that's significantly undervalued, and Booker doesn't expect that to change significantly either. “They may adjust their currency by a small percentage, but it is not likely to be enough to help. And the currency issue is off the table in the WTO.”
He said China enjoys a $103 billion trade surplus with the United States and that's expected to increase to $330 billion over the next few years.
“They reportedly have outstanding loans equal to 140 percent of their gross domestic production, and four of their banks are said to be technically insolvent. Much of their textile industry is owned by the state and they are not profitable. We can't compete with that kind of non-market behavior,” he said.
Booker said, with the cooperation of U.S. government officials, the U.S. cotton industry could deal with some of China's trade issues through retention of textile tariffs and implementation of safeguards. He also says the entire textile industry must work together to fight this and other trade issues, if the industry is to survive.
“The textile industry has been its own worst enemy, often divided on key issues, so NCC's textile leaders asked NCC to assume more leadership to bring consensus to trade issues as it has done in the farm policy arena,” he said.
“Now, we have 14 fiber and textile organizations signed on to support three important trade issues: Implementation of China safeguards, retention of textile tariffs under the WTO and rejection of provisions in regional agreements that would allow third countries to benefit from the agreements. We have more unity in the industry than ever before.”
With respect to China safeguards, Booker said: “We're not asking for anything we don't have a right to. China agreed to these safeguards when it joined the WTO.” He says new coalitions provide “more solid support from across the industry for what we're trying to do.”
Job losses soar
And it's a chore that demands attention. “We're losing jobs in the United States. We've lost three million jobs during the past two years, two million from the manufacturing sector. More than 270,000 textile workers lost their jobs in that time. We're simply exporting American jobs,” he said.
Booker said a handful of free trade agreements could help U.S. textiles, especially agreements in this hemisphere. “If we get agreements such as the Free Trade Area of the Americas, and if we can keep some tariffs under the WTO, we can curb some of the third party intrusion. We also may concentrate on more round trip cotton manufacturing, where we send our raw cotton and our cotton textiles into Central and South America and then bring it back as finished goods. China and other third countries would have to pay prevailing tariffs to get textiles in.”
Booker said several bilateral trade agreements currently being negotiated could help or hurt, depending upon final negotiated provisions. He cited the recently concluded agreement with Viet Nam as an example of how agreements can perpetuate the exportation of American jobs.
Booker said he doesn't believe the entire U.S. textile industry will vanish. “But we need to keep a healthy sewing industry in Central America since we will be dependent upon that region for labor intensive cut-and-sew operations that can help keep products using U.S. cotton and U.S. textiles competitive with those from Asian sources. At the moment they're also losing jobs to China.”
Hold to survive
He says American cotton farmers don't want to depend solely on shipping raw cotton abroad. “That's always a volatile proposition. We'll see some lean years and some fat ones. We have to hold onto enough (domestic) business to survive.”
Booker also said the industry must continually monitor trade negotiations and alert U.S. negotiators to textile industry needs.
“Trade agreements often have as much to do with national security and the war on terrorism as they do with economic benefits,” he said. “All the emphasis on new agreements would be less frustrating if we were getting compliance on the ones we already have.”