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Tue, Jan 04, 2005 - Page 12 News List

China's firms ready for US, EU action

TEXTILE MARKET The US and EU say they may move to protect their industries now that quotas have been lifted, but Chinese companies expect the effect to be temporary

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A Chinese vendor shows some of her textile stock at a shop in Beijing yesterday. Textile manufacturers around the world are bracing for a surge of Chinese apparel imports after decades-old, worldwide quotas expired last Saturday.

PHOTO: AP

China's textile companies, which make 17 percent of the clothes worn in the world by value, said they aren't worried that the US and EU will resort to new forms of protectionism after export quotas expired on Jan. 1.

Alphatex Beijing Knitting Co, which supplies cashmere sweaters to Harrods Department Store Co, expects sales to grow at least 30 percent this year, Managing Director Christian Murphy said in an interview in Beijing. Li & Fung Ltd, Hong Kong's largest trading company, doesn't anticipate new barriers will spoil its growth, said Nancy Chen, investor relations manager.

Forty years of US and European quotas on 2,400 items, including cotton shirts and denim, ended two days ago under a WTO agreement. Lawyers including Patrick Norton say anti-dumping lawsuits and alternative trade curbs won't slow growth in China's textiles and garment exports, which rose 26 percent to US$86 billion in the first 11 months of last year.

"The end result is inevitable: China is going to take a much larger share of the market," said Norton, managing partner of the Beijing office of US law firm O'Melveny & Myers LLP.

Nine in 10 textile makers in China are expanding production, according to a survey by Global Sources Ltd released on Nov. 29.

Alphatex spent US$500,000 on new machines and doubled its workforce the past six months.

"The lifting of the quotas means it will be open season for us," said Murphy, as he surveyed piles of knitted cashmere shawls destined for Europe at the firm's warehouse.

US and European textile makers, worried about the loss of jobs, have lobbied their governments to impose protectionist measures. The US Department of Commerce has said it would grant "safeguard" protection to local producers as long as they could prove that imports threaten their businesses.

"The US industry believes this is a life-or-death battle," said Beijing-based US trade lawyer Matthew McConkey of Coudert Brothers.

A New York judge on Dec. 30 blocked the US from imposing new curbs on textile imports. Judge Richard Goldberg of the US Court of International Trade granted an injunction sought by the US Association of Importers of Textiles and Apparel, which represents Liz Claiborne and other retailers who benefit from a free market in textiles. His ruling will stand, pending further court action.

Anti-dumping action against Chinese textiles may increase.

The EU said it will cut the amount of paperwork required for companies to make complaints about products they claims are being sold below market value, the Wall Street Journal reported on Dec. 23, citing officials and industry groups.

Trying to ease any backlash, China said on Dec. 27 that it would impose a 0.2 yuan (less than US$0.01) tax on every piece of textiles exported and possibly cap exports on some high-volume, labor-intensive textiles.

Both US and EU officials said China's steps don't go far enough, the Journal reported on Dec. 28.

"The measures that may be imposed in the US or Europe will only temporarily slow down orders moving to China. We're not worried," said Li & Fung's Chen.

Li & Fung generated US$2.5 billion in sales in the first half of last year from sales of textiles, electronics and other consumer- related exports to the US and Europe. Its customers include Walt Disney Co, Warner Brothers Entertainment and Kohl's Department Stores Inc.

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