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Chinese towel imports disruptive, commission finds

Workers stay busy at a towel factory in Yunlin County yesterday. The workers have complained that their monthly wages have been cut, forcing them to increase their work hours to make the same income. PHOTO: LEE CHING-FANG, TAIPEI TIMES

The government yesterday ruled that surging imports of Chinese towels have caused "market disruption" in Taiwan, setting the stage for the first consultations under WTO rules between Taiwan and China on safeguard mechanisms -- such as tariffs or quotas -- to address the problem.

After months of investigation, the International Trade Commission made an affirmative injury determination yesterday, saying that Chinese towel product imports have boomed to such a degree that they are disrupting the market for domestic producers.

The determination was made in accordance with the "transitional product-specific safeguard mechanism," which is included in the protocol on the accession of China to the WTO, Vice Minister of Economic Affairs Steve Chen (陳瑞隆) said at a press conference yesterday.

The commission will hold a hearing on the import relief measures to be taken within 30 days, and submit its suggestions to the Ministry of Economic Affairs for approval.

After approval, the ministry will request consultations with the Chinese authorities within 60 days to seek agreement on the measures.

The Yunlin Towel Industrial Technology and Development Association, which applied for import relief, urged the government to increase tariffs on Chinese towels to 50 percent from the current 10.5, and set import quotas on affected items.

The commission also made a preliminary finding yesterday that Chinese towel producers are dumping in the local market, saying that the domestic towel manufacturing industry is being injured by Chinese imports sold at artificially low prices.

The economic affairs ministry said it will pass on the finding to the Ministry of Finance, which is required to make a preliminary determination within the next 70 days, and determine whether a dumping tax should be imposed on imported Chinese towels.

The finance ministry said it will decide by May 26 whether the actions of Chinese manufacturers constitute dumping, earlier than the originally-scheduled date of June 20.

If the finance ministry finds that Taiwan's towel makers have been hurt by their Chinese counterparts, it will start imposing a provisional anti-dumping duty on Chinese towels in late May, on top of the current tariffs of 10.5 percent, the Department of Customs Administration said.

The customs administration has mailed questionnaires to China's 13 major towel exporters to determine the dumping margin.

After May 26, the government is allowed another 100 days to re-confirm its anti-dumping action and announce the final anti-dumping duty rate in early September, according to the finance ministry.

Although the government is handling the case via two separate processes, Chen said only one counteraction will be taken, since safeguard measures are taken under conditions of fair competition where dumping has not occurred.

Chen noted that duties are used to address unfair competition.

If Taiwan takes import-relief measures, China can retaliate by taking the same measures against Taiwanese imports after two or three years, Chen said.

According to the determination, Chinese towel imports have surged in both absolute and relative numbers since Taiwan lifted its ban on such imports on Feb. 15, 2002.

As a result, sales of locally made products declined by 20.9 percent in 2003 from the previous year, and continued to slide by 9.3 percent in 2004 and 2.3 percent in the first three quarters of last year, according to statistics provided by the commission.

The deteriorating sales also drove down local producers' sales prices, production, utility rates, number of employees and market share, which has caused injury to the local industry, the commission said.

By contrast, the market share of Chinese products has expanded significantly, from 45.5 percent in 2002 to 70 percent in the first three quarters of last year, when Taiwanese products only captured 8.2 percent of the market, the commission said.

Chinese towel manufacturers are dumping in Taiwan by selling their products at abnormally low values here to undercut local products, said Huang Chi-huei (黃智輝), executive secretary of the commission. Chinese towels were priced at NT$73.06 per kilogram lower than the same items made by Taiwanese companies in 2002, and the difference widened to NT$83.59 in 2003 and NT$93.2 in 2004, Huang said, citing commission figures.

Additional reporting by Jackie Lin
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