China Cancels Promised Textile Export Tariffs

by Mary Swire, for LawAndTax-News.com, Hong Kong

31 May 2005

Following the US' imposition of quotas on Chinese textiles, and the EU's appeal to the WTO - which also means the imposition of quotas - the Chinese reacted angrily on Monday, withdrawing conciliatory export tariffs which were to have been quintupled from June 1.

It had been a condition of the export tariff increases that China's major markets would not impose tariff or quota controls. "A previous decision to quintuple the export tariffs on 74 textile categories, on which export tariffs were imposed from January 1 this year, was revoked," the official Xinhua News Agency said, citing the Customs Tariff Commission of China's Cabinet.

Announcing restrictions on the growth of imports of Chinese-made cotton pants, underwear, synthetic fiber shirts and other goods to an annual rate of 7.5% last week, US Commerce Secretary Carlos Gutierrez said there had been a surge in shipments from China since global quotas were lifted on Jan. 1. The decision was made by the Committee for the Implementation of Textile Agreements. "Today's action by CITA demonstrates this administration's commitment to leveling the playing field for U.S. industry by enforcing our trade agreements," said Gutierrez. According to Commerce Department statistics, imports of Chinese textiles were up 54% in the first quarter on a year earlier.

The EU said that imports of Chinese-made T-shirts rose by 187% in the first four months of this year, while flax yarn imports rose by 56%, and went to the to the WTO on Friday, giving China 15 days to react. It means the EU will be allowed to restrict the growth of imports of flax yarn and T-shirts to an annual rate of 7.5%.

China's Commerce Minister Bo Xilai accused Washington and the EU of violating WTO rules by failing to provide adequate evidence of market disruption. "In our opinion, this move lacks legal grounding and therefore is incorrect," Mr Bo said at a news conference. "The US and EU have not provided adequate data ... That is unreasonable and unscientific." He said the US and EU were partly to blame for the jump in Chinese textile imports because they failed to carry out earlier promises to lower market barriers, leading to a shock when the quota system, which had been in place since 1995, was lifted. "The fundamental, true reason for this is that the US and EU could not faithfully and honestly implement their obligations," he said.

Mr Gutierrez is due to visit China this week and will have talks with Mr Bo, who said that despite the problems over textiles, China wanted healthy trade relations with Washington. "There are areas where we can seek mutual benefit," he said. "So we are quite optimistic about the future of this bilateral trade relationship."

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