China Regrets Decision by U

China Regrets Decision by U.S. to Limit Imports

November 19, 2003 By KEITH BRADSHER

HONG KONG, Nov. 19 - The Chinese government gave a temperate response today to the Bush administration's decision to limit the growth of imports of certain Chinese fabrics and garments, contending that the move violated free trade principles.

The Commerce Ministry in Beijing issued a statement expressing its regret and its opposition to Washington's action, but stopped short of threatening retaliation against American exports to China or promising an appeal to the World Trade Organization.

The statement from the Commerce Ministry was critical of the Bush administration but avoided threats. The administration's decision "runs against W.T.O. principles on free trade, transparency and nondiscrimination," the ministry's spokesman, Chong Quan, said in the statement. "As a W.T.O. member, China reserves the right to lodge lawsuits with relevant organizations of the W.T.O. to safeguard the interests of Chinese industries."

Chinese ministries tend to issue statements quoting spokesmen when they want to play down an issue, while subjects of greater importance to Beijing merit statements quoting policymakers.

On Tuesday, a team of Chinese buyers of farm goods canceled a trip to Chicago, but it was not clear if that was related to the textile dispute or to an American denial of visas for some members of the purchasing team. Peter Thornton, the marketing manager for Asia at the American Soybean Association official, said the trade group had received a letter from the Chinese government that cited only the visa problem in canceling the trip. He said it was faxed to the group's Beijing office more than six hours before the administration announced the import restrictions.

But Mr. Thornton added that the timing of the trip's cancellation had nonetheless prompted speculation that something more was involved. A Commerce Department spokeswoman in Washington said the United States had notified China of its plans before announcing them to the public, but did not give the precise timing of the notification.

The Commerce Department announced on Tuesday in Washington that it had granted a request by American textile manufacturers for limits on the growth rate in American imports of knit fabrics, bras and sleepwear from China. The United States invoked a so-called "safeguard" clause that allows countries facing a sharp increase in textile or apparel imports combined with job losses at home to place limits on such shipments.

The Commerce Ministry in Beijing contended that the American textile industry had failed to prove that its difficulties were caused by imports from China. The industry has been under pressure from lower-cost imports since the 1960's and has lost hundreds of thousands of jobs, but it contends that the job losses have recently accelerated because of China's exports.

Peter Shay, the managing director of MMG Asia Ltd., a fashion consulting firm here, said restrictions on imports from China would probably prompt American companies to import more goods from low-cost factories elsewhere. "Most likely, it'll mean a shift to other plants in Asia, but not necessarily a return to American makers," he said.

Under the safeguard clause, the United States could limit the increase in imports of these goods over the coming 12 months to 7.5 percent. But that would still leave China far ahead of where it was when it joined the World Trade Organization in November 2001.

Chinese textile and apparel exports began climbing sharply then, and an increase of 7.5 percent now would come on top of gains that occurred in 2002. Bra exports, for example, more than tripled in 2002 with the admittance to the World Trade Organization and the removal of previous American restrictions, and had not been expected by financial analysts to grow more than another 15 percent in the coming year because factories are already running at full speed.

China has lately been going out of its way to reduce trade frictions with the United States, notably by approving the purchase of more than $1 billion of General Motors cars and auto parts last week. The textile and apparel exports at issue this week represent less than one-twentieth of China's exports in its third-largest category of shipments to the United States by value. Computers, computer accessories and semiconductors are the biggest category, while toys and sporting goods make up the second biggest.

Many of China's main textile and apparel manufacturers are listed on the Hong Kong stock exchange, and most of their factories are located within a 100-mile radius of here, in the densely populated Pearl River delta region of southern China. Textile and apparel stocks were down 2 to 6 percent by the close of trading today, but were even lower in the morning and seemed to be recovering by the afternoon.

A textile industry analyst at UBS here, Nicholas Tan, said the American action would only restrict the growth rate for 4.7 percent of China's textile and apparel exports to the United States. He said import restrictions were was a step by President Bush that investors should have been expecting. "It's really giving away a bone to get some good will," he said. "I would too, if I were him."

The Chinese dismay was a sign of Beijing's unhappiness that World Trade Organization membership has not been sufficient to head off trade restrictions, Mr. Tan said, adding that Chinese officials had hoped that membership "would be a bed of roses, but it hasn't worked out that way."

Industrialized nations have agreed to eliminate in 2005 their complex quotas and steep tariffs on textile and apparel imports from developing countries, where widespread unemployment, poverty and low costs of living have left millions of workers eager for jobs paying less than $2 a day. No country has more potential workers than China, where economists estimate that the number of unemployed people in rural areas exceeds the entire American labor force.

The prospect of competing with such a vast and inexpensive work force has alarmed other developing countries, many having higher wages and less-developed roads and communications, which makes it more costly to ship goods to affluent countries. But China's capacity to produce fabrics and garments cheaply has especially alarmed workers and companies in American states like North Carolina, whose Congressional delegation has enthusiastically supported import restrictions.

The possibility that the American action could lead to more serious trade frictions, together with a report of dwindling foreign purchases of American securities, was enough to send the dollar down to a new low of $1.1978 to the euro in Asian trading. But the dollar began to recover in European trading after the Commerce Ministry issued its statement.

The dollar rose against the Japanese yen, to 109.03 yen. Traders suspected that the Japanese government had intervened in the market to support the dollar. The foreign minister of Japan, Sadakazu Tanigaki, declined to confirm this, but said that his government was prepared to respond to sharp movements in currency rates. http://www.nytimes.com/2003/11/19/international/asia/19CND-CHIN.html? ex=1070280939&ei=1&en=6cb7f48e867887fe