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Subsidy charge looms on textiles export

By Jiang Wei (China Daily)
Updated: 2007-05-11 08:30

Chinese textile manufacturers, already victims of overseasdumpingcharges and safeguard measures, now face a potential US countervailing investigation.

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The US National Council of Textile Organizations (NCTO) is getting in touch with lawyers representing US paper enterprises, which initiated the first countervailing case against Chinese products, to launch similar charges against "Made in China" garments, according to China Chamber of Commerce for Import and Export of Textiles (CCCT).

The US Department of Commerce in March announced a preliminary countervailing duty on "Made in China" coated paper. With that, it contravened a two-decade rule of not applying the trade remedy to goods from so-called non-market economies, like China.

"The US industrial organization may not launch the case in the near future but it is likely to make the decision for the next step after the final ruling on the coated paper case," said an official with CCCT who declined to give her name.

US industry or government might stir into action when the Sino-US agreement on textile trade, which caps the growth of China's textile and garment exports to the United States, expires in 2008.

The removal of quotas in global textile trade triggered in 2005 a surge in China's textile exports to the US. The American government, which feared this might hurt its domestic industry, launched special safeguard measures on a few categories of Chinese textiles and garments. The two countries finally reached the agreement after months of negotiations.

"If the NCTO does file a complaint against Chinese garments at the US Department of Commerce, the investigation will affect a much larger scale of subsidies than in the coated paper case," said a CCCT official.

CCCT noted the possible investigation on Chinese garment industry, which is mainly export-oriented, is likely to target export-promoting subsidies, policies and taxation. It may result in higher countervailing duties. In the paper case, the US mainly investigated the "favorable loans".

Some experts worry that other industries in China are also likely to face similar cases in the US.

"Within six months, we think a dozen or so new preliminary countervailing findings will be in place against Chinese firms," said Stephen Green, senior economist with Standard Chartered.

Matthew McConkey, an expert from US-based law firm DLA Piper, said a number of US firms are "watching and preparing". The US flooring industry, for example, is likely to file a countervailing complaint against its Chinese rivals.

He predicted there would be at least three to four similar cases from the US this year and said the scale of the cases would also increase.

(China Daily 05/11/2007 page13)