Statement of Carlos Moore, American Textile Manufacturers Institute

This statement is submitted for the record by the American Textile Manufacturers Institute (ATMI), the national trade association of the domestic textile mill products industry.

ATMI is opposed to renewal of normal trade relations (NTR) status for the People’s Republic of China. We urge Congress to pass H.J.Res. 50, a resolution to disapprove of the president’s waiver of the Jackson-Vanik amendment’s requirements, which was granted in order to continue China’s normal trade relations status.

As ATMI has stated on numerous occasions, China has not earned NTR status with the United States because of its continued irresponsible behavior on a variety of fronts.

With respect to textile-related issues specifically, China has signed six bilateral textile trade agreements with the United States over the past two decades and has subsequently broken every one of them. China illegally smuggles more than $4 billion worth of textiles and apparel into the United States each year. It routinely violates U.S. design and copyright laws – in fact, China has signed four intellectual property rights agreements – and intellectual property theft in China remains rampant. In fact, a recent National Trade Estimates report compiled by the U.S. Trade Representative's Office notes that "U.S. industry estimates of intellectual property losses in China due to counterfeiting, piracy, and exports to third countries have exceeded $2 billion."¹

In addition, China is already exploiting a loophole which exists in current U.S. trade regulations that allows it, as a non-market economy, to be inexplicably exempted from U.S. countervailing duty law against export subsidies. Further, China maintains tariff and non-tariff barriers that have restricted U.S. textile and apparel exports, despite repeated promises to liberalize. This is yet another example of how China gets better treatment than our other trading partners.

Thus, there is nothing "normal" about the manner in which China conducts its trade policy, and it is not deserving of NTR status with the U.S.

Also, make no mistake about it – NTR status for China, and the terms under which it is preparing to enter the World Trade Organization, will severely undermine the economic partnerships that have formed and continue to form between U.S. yarn and fabric producers and apparel manufacturers in Mexico and the Caribbean. Once all global textile and apparel quotas are removed, China is poised to essentially wipe out these mutually beneficial trade arrangements we have made with our hemispheric neighbors.

This concern is borne out by a 1999 U.S. International Trade Commission (ITC) study on China's accession to the WTO², which determined the Chinese share of apparel imports into the U.S. would more than triple as quotas are phased out by the year 2005. The ITC study revealed that the effect of the Chinese quota phase-out on other regions, particularly the Caribbean nations and Mexico, will be equally severe. These countries' growing apparel sectors, which exist almost entirely to service U.S. markets, will be decimated by the early phase-out of controls on imports from China.

The major concern about the early phase-out of quotas on imports of textiles and apparel from China is that China is getting a better deal than the rest of our trading partners. Once China joins the WTO, the U.S. has agreed to remove controls on imports from China by January 1, 2005. This means that, as a WTO member, China will be subject to a much shorter quota phase-out period than other WTO members. For example, if China joins the WTO by January 1, 2002, it will receive a three-year phase-out period. Other U.S. trading partners that are WTO members faced a ten-year phase-out period. China is the least deserving country imaginable for this preferential treatment.

Giving China enhanced access to the U.S. market for its vast subsidized textile and apparel sector while U.S. textile and apparel access into the Chinese market remains seriously impaired seems to be an act of unilateral surrender on the part of the United States. In light of the current economic crisis facing the U.S. textile industry, with nearly 50 plants having closed in the first five months of this year, and over 56,000 workers – 10 percent of the industry’s entire workforce -- losing their jobs in the past twelve months, the U.S. textile industry cannot afford to make further unwarranted trade concessions, such as granting China normal trade relations status.

The ongoing devastation to the U.S. textile industry resulting from the Asian currency devaluations of recent years, which has given Asian imports the equivalent of a 40% price cut upon entering the U.S., has made our industry even more vulnerable to subsidized Chinese imports. Without some government mechanism to correct this imbalance, extending NTR for China would only compound the problem. On the other hand, denial of NTR to China would offset, at least in part, the damage to our industry by devalued Asian imports.

Finally, China’s continuing practice of arresting dissenters, as well as U.S. citizens and academics indicate that it is unworthy of normal trade relations. Seizure of a U.S. Navy plane, detention of its crew and then handing the U.S. a $1 million bill for what amounts to a kidnapping should be the final straw. The U.S. should not ignore these actions and "reward" China by continuing normal trade relations status.

In a larger sense, renewal of NTR for China signals a willingness on the part of the U.S. to grant China permanent NTR and membership in the WTO. This Administration and the previous one have said the WTO accession agreement between the U.S. and China will hurt no one in the U.S. and will provide new and important export opportunities for U.S. companies. The reality is quite different:

The U.S. textile industry, its nearly 500,000 workers and its suppliers in the man-made fiber, cotton, chemical, machinery and related industries will be hurt by the special treatment provided China in the accession agreement;

Those U.S. companies hoping to sell products and services to WTO member China must consider the opportunity to do so to be just that – a hope. China is already backtracking on several commitments and has never embraced imports in the past.

So, the impact on the U.S. of normal trade relations with China (and the WTO membership that it brings) will certainly damage the U.S. textile industry, its workers and suppliers. On the other hand, accession might benefit other U.S. industries. Not something to bet an important, essential industry on – but that is what the U.S. government is doing.

In conclusion, for the reasons we have stated, we urge the committee to adopt

H.J.Res. 50 and reject renewal of NTR with China.

¹ 1999 National Trade Estimate Report on Foreign Trade Barriers, USTR, p. 60.
² ASSESSMENT OF THE ECONOMIC EFFECTS ON THE UNITED STATES OF CHINA'S ACCESSION TO THE WTO, Investigation 332-403, (Publication 3229; September 1999).