Further Thoughts on the Textile Decision

As promised, some more stuff on today's decision by the US to invoke safeguard measures against China textiles. For a full news background, Yahoo is as good a place as any to start.

Another bit of reference is the Federal Register notice detailing the procedure by which the US Committee for the Implementation of Textile Agreements would solicity and digest public comments on this issue. This was effective on May 23, 2003 and got the ball rolling.

The safeguard provision that is being invoked is from China's WTO accession agreement. The specific citation to the safeguard measure is Chapter IV, section D, sub 11 Textiles, paragraph 242. See Chapter IV in its entirety on the Trade Compliance Center site. The TCC also has a useful summary of the whole agreement.

So here is what is supposed to happen:

1. The US sends a request to China for consultation, complete with data showing a market disruption for the relevant goods, that threaten "to impede the orderly development of trade in these products".

2. Once the request is received, China shall "hold its shipments to the requesting Member of textile or textile products in the category or categories subject to these consultations to a level no greater than 7.5 per cent (6 per cent for wool product categories) above the amount entered during the first 12 months of the most recent 14 months preceding the month in which the request for consultations was made". I put the language in verbatim to show how fun your typical trade agreement language is. No wonder that the news reports have been a bit fuzzy on what the safeguards are actually going to do. To cut through the blah blah blah, it is a "voluntary" quota calculated from a certain 12-month baseline period.

3. The US and China will have to start talking to each other about this, with a 90-day period specified for resolution.

4. Surprise! If the 90-day period is up with no resolution, talks will keep going, and the quotas will remain in place.

5. The real time restriction is either December 31 of the year during which the request is made or, if fewer than three months are left in the calendar year, then 12 months following the request. Hint: guess what happens almost exactly one year from now? Yes, that's right, the US election will coincide nicely with the end of the 12-month period, assuming of course that an agreement cannot be concluded by that time. Hmm . . .