This isn't really a surprise, it has been coming for some time now. What isn't really clear is how China will react. It isn't at all evident that this will bring a floating of the yuan any nearer. It will also be interesting to see how the EU - who are also examining whether to initiate a similar quota process - will respond. It is not at all evident they they may not try and open a breach to sell "trains and boats and planes" etc. in enhanced quantities.
The Bush administration.... announced on Friday that it would impose new quotas on cotton shirts, trousers and underwear from that country...........The announcement came one day after President Bush met with the leaders of five Central American countries and the Dominican Republic to promote a trade pact with these nations that has stalled in Congress.
The textile industry has opposed the pact, the Central American Free Trade Agreement, as another threat to the American industry, but Mr. Johnson's organization broke with the other trade associations and endorsed the pact, known as Cafta, this week. Kimberly Elliott, a trade specialist at the Institute for International Economics, said that the administration undoubtedly reached a quick decision in favor of the American textile industry in part to win more support for Cafta. "The administration has been working the link between the safeguards and Cafta for some time, but I think they would have done this eventually even if Cafta didn't exist," Ms. Elliott said.
"If the administration is going to take a hit from China for this," she said, "it might as well get some benefit for Cafta."
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