WTO -Bangladesh continues negotiations on apparel?s duty-free access to US mkt"

Financial Express: "LDCs to maintain unity until demands are met
Bangladesh continues negotiations on apparel?s duty-free access to US mkt"
Govinda Shil
12/16/2005

Commerce Minister Altaf Hossain Chowdhury said Thursday he is hopeful about inclusion of the issue of apparel exports in the agenda of duty- and quota-free items to the US market.

Bangladesh, Vietnam and other apparel exporting countries were continuing their negotiations with the USA until the filing of this report at 8.30 PM (Bangladesh Standard Time or BST) on apparel issue to break a deadlock.

The deadlock ensued when the United States Trade Representative (USTR) Rob Portman said Bangladesh and Vietnam should not be getting zero tariff and unlimited access to the US market.

'I am not satisfied, so far, (with the WTO meetings),' said Chowdhury, the head of Bangladesh's delegation to the sixth World Trade Organisation (WTO) ministerial meeting, in an interview over the telephone with the Financial Express.

The minister said, the USA has, however, agreed to provide duty and quota free entry of some 2,000 items.

Earlier, the least developed countries (LDCs) sat together and decided to maintain close unity among themselves until their demands for market access, handling farm subsidy issue, movement of labour force are met, said a commerce ministry source in Dhaka.

'Our unity is quite strong?and I believe we will hold it up,' declared Chowdhury, saying all the LDCs have been demonstrating a strong fellow feeling for each other.

Chowdhury is expecting Vietnam and Bangladesh would be able to get 'something' through negotiations with the United States that announced significant trade-facilitation aid to the poorest nations.
'I won't be satisfied until export items of all the LDCs are given duty- and quota-free access to the markets of the developed nations,' said Bangladesh's commerce minister.

As the LDCs expressed their dissatisfaction over the market access issue, the USTR Rob Portman called upon ministers not to leave Hong Kong without setting a date for another meeting to settle a framework that would guide them in striking a new trade deal by the end of 2006.

Rob Portman, according to reports by the wire services, said at a press conference that Bangladesh and Vietnam should not be receiving duty- and quota-free facilities as there are some African nations who need such facilities most and that Bangladesh would soon be graduating to 'developing country' status.

Commerce Minister Altaf Hossain Chowdhury defended Bangladesh's stance, saying that apparel was one of the sectors of the country that might have been doing better, but the Bangladesh is still a member of LDC group and deserves better treatment in areas of trade.

Earlier, the Bangladesh minister met Vietnam delegates to adopt a common strategy after US had said 'no' to their apparel export proposal. He also met Iran's trade minister, Director General (DG) of WTO Pascal Lamy, and the delegation of the Maldives Thursday.
Many countries like Brazil, China, France and Australia have endorsed the duty- and quota-free market access of Bangladesh and other LDC members.

The World Bank added its voice to the indignation expressed by the LDCs over their treatment to the WTO meeting in Hong Kong, saying there had been much talk about development but too little action.

BSS adds from Hong Kong: The tricky negotiation at the WTO global trade summit in Hong Kong is entering the most critical stage as the LDCs are putting vigorous efforts to win the zero tariff access of their products to the market of the developed nations.
The Bangladesh garment export issue has come to the fore as some major developed countries appear to be reluctant to allow zero tariff access to readymade garments of Bangladesh in their markets.

In talks with Commerce Minister Altaf Hossain Chowdhury Wednesday, WTO Director General Pascal Lamy frankly acknowledged the hard time Bangladesh is facing in negotiation table. He said he fully understands it and hopes to solve the problem in the end.

Altaf told the news agency the issue is 'a long war' to establish the legitimate trade interests of Bangladesh in the competitive world as an individual nation and as a partner of the LDC group.

Pakistan imposes anti-dumping duties on polyester yarn

Pakistan imposes anti-dumping duties on polyester yarn

Pakistan has placed anti-dumping duties of up to 37 per cent on imports of polyester filament yarns. The duties will apply to over 30 companies heralding from four Asian countries: Malaysia, South Korea, Indonesia and Thailand.

• Pakistan's National Tariff Commission (NTC) has moved to prevent dumping of polyester fabrics in HS categories 5402 3300 (textured polyester yarn filaments) and 5402 4300 (single, untwisted polyester filament yarn).


• Provisional dumping duties, lasting for four months, range from 4 to 37 per cent on companies based in Malaysia, South Korea, Indonesia and Thailand.


• A final decision on anti-dumping duties will be made six months following the statement release.

The NTC decided on 12 November to uphold a complaint received by the Filament Yarn Manufacturers Association (FYMA) that polyester yarn was being "dumped" on the Pakistani market. The FYMA filed the complaint on 30 March and the NTC commenced investigations into 13 of the 38 identified companies exporting the yarn to Pakistan. In an official statement released on 12 November, it confirmed anti-dumping duties will be applicable to most of the companies investigated. The NTC looked into imports during the 12-months of 2004 to assess dumping, and a period of three-and-a-half years running until the end of 2004 to assess injury.

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International Law Office - Legal Newsletter

Textiles and Clothing after 2005" by Tokia Saïfi. The report crystallizes the concerns of a large number of European parliamentarians that are directly related to the growing share of Chinese-made textile products in the EU market. The report urges for competition between the European Union and the Chinese mainland using balanced weaponry, which, in the words of the report, "so far has certainly not been the case".

Importantly, the report emphasizes labour and environmental standards, and calls on the European Commission on the one hand to negotiate the enforcement of such standards among World Trade Organization (WTO) members, and on the other to prohibit third-country products that do not meet such standards. The report is also critical of the level of piracy and counterfeiting that it alleges is being practised, to the detriment of EU industry. However, the report does admit that "massive reductions in the prices of particular product groups can indeed benefit European consumers", but that this scenario leaves the indigenous clothing industry with the almost impossible task of competing. The harder-hitting elements of">International Law Office - Legal Newsletter: "European Parliament Calls for Fair Trading Standards in Textiles Market
Contributed by Van Bael & Bellis
October 14 2005

On September 6 2005 the European Parliament adopted - by a large majority - a report entitled 'Textiles and Clothing after 2005' by Tokia Saïfi. The report crystallizes the concerns of a large number of European parliamentarians that are directly related to the growing share of Chinese-made textile products in the EU market. The report urges for competition between the European Union and the Chinese mainland using balanced weaponry, which, in the words of the report, 'so far has certainly not been the case'.

Importantly, the report emphasizes labour and environmental standards, and calls on the European Commission on the one hand to negotiate the enforcement of such standards among World Trade Organization (WTO) members, and on the other to prohibit third-country products that do not meet such standards. The report is also critical of the level of piracy and counterfeiting that it alleges is being practised, to the detriment of EU industry. However, the report does admit that 'massive reductions in the prices of particular product groups can indeed benefit European consumers', but that this scenario leaves the indigenous clothing industry with the almost impossible task of competing. The harder-hitting elements of"

SA-- Legislation Introduced to Give Industrial Users Standing in AD/CVD cases

Filed in: "Textiles & WTO"


International Trade Law News: "Legislation Introduced to Give Industrial Users Standing in AD/CVD Cases

Representative Joe Knollenberg (R-MI), along with 18 co-sponsors, today introduced H.R. 4217, the 'American Manufacturing Competitiveness Act'. If enacted, the measure would permit U.S. industrial users of imported products to be 'interested parties', thus having legal standing in antidumping and countervailing duty cases conducted by the U.S. International Trade Commission (ITC) and Department of Commerce (DOC). The bill would require the ITC and DOC to allow full participation by industrial users in AD/CVD cases when making an initial injury determination, when conducting changed circumstances reviews and when conducting five-year sunset reviews.

H.R. 4217 would also require the ITC to conduct an economic impact test to determine the net effect on American manufacturers of AD/CVD decisions. In order for an affirmative injury determination to be made the ITC would have to consider the economic impact on industrial users in addition to those of the petitioning parties.

This legislation is supported by a number of trade associations, including the Auto Trade Policy Council, the Motor and Equipment Manufacturing Association, the Precision Metalforming Association, the CITAC Steel Task Force and several major manufacturing firms."

USA-- Legislation Introduced to Give Industrial Users Standing in AD/CVD cases

International Trade Law News: "Legislation Introduced to Give Industrial Users Standing in AD/CVD Cases

Representative Joe Knollenberg (R-MI), along with 18 co-sponsors, today introduced H.R. 4217, the 'American Manufacturing Competitiveness Act'. If enacted, the measure would permit U.S. industrial users of imported products to be 'interested parties', thus having legal standing in antidumping and countervailing duty cases conducted by the U.S. International Trade Commission (ITC) and Department of Commerce (DOC). The bill would require the ITC and DOC to allow full participation by industrial users in AD/CVD cases when making an initial injury determination, when conducting changed circumstances reviews and when conducting five-year sunset reviews.

H.R. 4217 would also require the ITC to conduct an economic impact test to determine the net effect on American manufacturers of AD/CVD decisions. In order for an affirmative injury determination to be made the ITC would have to consider the economic impact on industrial users in addition to those of the petitioning parties.

This legislation is supported by a number of trade associations, including the Auto Trade Policy Council, the Motor and Equipment Manufacturing Association, the Precision Metalforming Association, the CITAC Steel Task Force and several major manufacturing firms."

US, China expected to sign textile deal Tuesday

US, China expected to sign textile deal Tuesday
Mon Nov 7, 2005 7:30 PM ET

By Doug Palmer

WASHINGTON (Reuters) - The United States and China are expected to sign a three-year agreement on Tuesday reining in China's booming clothing and textile shipments to the United States, a congressional aide said on Monday.

U.S. Trade Representative Rob Portman and Chinese Commerce Minister Bo Xilai are both in London for meetings related to world trade talks. They are expected to hold a bilateral meeting on Tuesday morning and sign the pact, said Carolyn Hern, a spokeswoman for Rep. Robin Hayes, a North Carolina Republican who has been a leading congressional advocate for such a pact.

"They are expected to sign it about 2 or 3 a.m. (EST) our time," Hern said.

A spokeswoman for the U.S. Trade Representative's office would only confirm that Portman and Bo will hold a joint news conference on Tuesday morning in London.

A textile agreement would smooth over a rough spot in the U.S.-China trade relationship before President George W. Bush visits Beijing the middle of this month.

China's exports of clothing and textile products to the United States jumped more than 50 percent in the first eight months of the 2005 to nearly $17.7 billion following the end of a global quota system on January 1.

That prompted U.S. textile producers to seek protection under a "safeguard" provision of China's 2001 entry into the World Trade Organization. The measure allows WTO members to restrict the growth in imports from China to 7.5 percent annually when there is a market-disrupting surge.

SEEKING COMPREHENSIVE PACT

The Bush administration has imposed safeguard curbs on billions of dollar of Chinese clothing imports this year. But because the curbs have to be renewed annually, textile groups have pushed for a comprehensive agreement that would limit imports through 2008, when the safeguard provision expires.

Cass Johnson, president of the National Council of Textile Organizations, said on Sunday the new textile agreement was expected to restrict 34 categories of clothing and textile imports from China through 2008.

China is expected to "receive only a minimal increase -- 3.8 percent ... -- in market access in the 14 largest and most sensitive textile apparel categories as compared to the use of the safeguard," Johnson said.

The quotas for those 14 categories -- which include trousers, shirts, knits, underwear and bras -- are expected to grow 5.5 percent in 2006, 7.8 percent in 2007 and 10.3 percent in 2008, compared to 7.5 percent annually under the safeguard.

Growth rates in the other 20 categories are expected to average about 10 percent to 12 percent in 2006, 12 percent to 15 percent in 2007 and 16 percent in 2008, an industry official said.

Hayes and U.S. textile industry groups have scheduled an afternoon news conference on Tuesday to discuss the pact.

"He's very excited about the announcement," Hern said. "Robin was pushing for this agreement for the benefit of the industry. If they're happy, he is."

Hayes helped the Bush administration several months ago win approval of a free trade agreement with Central America opposed by vocal portions of the textile industry by agreeing in the very last minutes of a House vote to support the pact.

He explained afterward that he voted for the U.S.-Central American Free Trade Agreement after receiving assurances that the Bush administration would take action to deal with mounting textile and clothing imports from China.

Bangkok Agreement: Six Asian Nations to Extend Tariff Cuts

six South and Southeastern Asian Nations to Extend Tariff Cuts

China, India, South Korea, Bangladesh, Srilanka and Laos have agreed to extend and deepen tariff cuts starting next July, as party of an expanded free trade agreement.

Trade ministers from these nations,agreed that to reduce tariffs by an average of 30 percent, from 22 percent previously, and more than double the product range, extending the agreement to 4,800 products, from 1,800.

The ministers, who met in Beijing, agreed to implement an accord reached in last April that expands the regional free trade pact, the so-called 'Bangkok Agreement'. The accord will be renamed the Asia Pacific Free Trade Area.

The Bangkok Agreement was signed in 1975 as an initiative of the UN Economic and Social Commission for Asia and the Pacific. It is a preferential tariff arrangement that aims at promoting intra-regional trade through exchange of mutually agreed concessions by member countries.

With a total population of more than 2.6 billion, the six countries' GDP last year totaled 3 trillion US dollars, boosting future potentials for closer economic integratio"

Farm Subsidies, Doha Negotiations & Hong-Kong Ministerial

Doha stalemate
By Ben Muse on Doha Round

E.U. negotiator Peter Mandelson is facing lots of criticism for his agricultural negotiation proposals from Franc however, he got a go on a meeting held recently in Paris.

The trade ministers of the Five Interested Parties (E.U., U.S., Brazil, India, and Australia) were to meet again today, and be joined by ministers from Argentina, Canada, China, New Zealand, Japan and Switzerland.

However, Tom Wright indicates that the meeting was canceled because of France's opposition to further compromises in the E.U.'s negotiating position:  Trade envoys gloomy on next meeting (International Herald Tribune, Oct 20)
Martin Arnold provides details on comments by France's interior minister:  Sarkozy attacks Mandelson’s ‘fool’s bargain’ (Financial Times, Oct 20)
Nicolas Sarkozy, France’s interior minister, on Thursday launched a stinging attack against Peter Mandelson, the European Union trade commissioner, for accepting a “fool’s bargain” in his offer to cut farm tariffs and subsidies...
The French agriculture ministry said on Wednesday evening it could not accept that Mr Mandelson “in any way whatsoever” raise farm trade in talks this week. Its comments came despite EU states backing the trade commissioner earlier in the week.
Sarkozy's editorial apparently went beyond criticism of the particular proposals advanced by Mandelson, to fundamental criticism of the E.U. trade negotiating institutions:
Mr Sarkozy, leader of France’s ruling centre-right party and favourite for the 2007 presidential elections, called for a shake-up of EU international trade negotiations, one of the few areas where Brussels has full powers to act on behalf of its 25 members.
He said Europe should accept that reform was needed after France’s humiliating No vote in its referendum over the European constitution on May 29. “The EU must draw lessons from May 29 by changing its approach to international negotiations,” he said...
He said Mr Mandelson had “gone beyond the mandate of negotiations” granted by EU member states to the Commission and argued that Europe needed “a political leader elected by his peers and accountable before the people and their representatives”.
The piece notes that the French critique may undercut Mandelson's future negotiating credibility.  Also that Sarkozy is viewed (in the French context) as a relatively strong advocate of market approaches to resource allocation.
Martin refers to comments by France's Interior Minister, and from its agriculture ministry.  Tom Wright also quoted remarks by its Trade Minister, Christine Lagarde, as well.
William Schomberg and Richard Waddington report that: Trading nations pile pressure on EU over farms (Reuters India, Oct 21).

They quote Mandelson as trying to expand the range of issues currently in play.  Right now, the world is waiting on an agricultural breakthrough; other issues are moving in slow motion until people see what sort of compromise might be reached on agriculture.  Mandelson's comments suggest that E.U. compromise on agriculture might be easier to get if the Europeans see progress, and something for them, in the other negotiating areas.  However they also quote the Brazilian foreign minister saying that's not going to happen.
Mandelson is also quoted as referring to the U.S. proposal for a 90% tariff cut as a "hopelessly over-inflated bid" that may impede negotiating progress.
U.S. and Australian hopes:
Both the United States and Australia say any new EU offer would have to be pitched between the U.S. 90 percent cut proposal and a call by the Brazil-led G20 developing country alliance for average tariff cuts of just over 50 percent.
The EU has said it could go over 50 percent only on its top tariffs and wants a wide number of exceptions from the cuts.
And a reminder that it's not over yet:
Australian Trade Minister Mark Vaile still had hopes of a deal. "Discussions get made inside a pressure cooker and the pressure comes on the closer you get to decisions," he said.
Tim Colebatch, in Australia, indicates that Mandelson may hope to come back with an new proposal next week:  Europe refuses to shift tariffs (The Age, Oct 21):
Instead, EU trade commissioner Peter Mandelson said he needed another week to put a proposal together. On Tuesday Mr Mandelson fought off a French-led move to hobble his authority to negotiate tariff cuts.
David Gow and Larry Elliot report rumors that Mandelson may "defy" French objections and offer new proposals in the next week: Mandelson to risk French wrath with subsidy cuts   :
With the the main players in the World Trade Organisation negotiations warning that the next fortnight will be make-or-break, EU trade commissioner, Peter Mandelson, was last night said to be preparing to risk political crisis, defying France to offer further cuts in farm subsidies and food tariffs...
Mr Mandelson, under renewed fire from Paris for going beyond his mandate, warned that talks at the WTO in Geneva needed a breakthrough "in the next fortnight" or the planned summit would have to scale down its ambitions. A posse of senior French ministers lined up to warn Mr Mandelson to drop negotiations on agriculture, effectively gagging him, but he is understood to be ready to make new concessions to kickstart movement in manufactured goods and services.
He is said to be calculating that France, in the throes of a political crisis since rejecting the new EU constitution in May, will hesitate to wield the veto on any post-Hong Kong deal and will fail to win backing from other EU states in the run-up to the December summit of 148 WTO states.
 
Dan Looker quotes U.S. trade negotiator, Rob Portman saying that E.U. proposals as late as the end of October could still be relevant:
Portman and Johanns said that, because the issue of tariff cuts is complex, any serious proposal from the E.U. needs to be made by the end of October in order for negotiators to have time to study it before the Hong Kong meeting. Portman is returning to the U.S. tomorrow, but he said he would be willing to return to Europe next week to continue talks on market access.
Portman, Johanns see possible WTO failure in Hong Kong (Agriculture Online, Oct 20).

US Court Sentenced Company President in Connection With Scheme to Avoid Paying Antidumping Duties

International Trade Law News

Bernard Smith, the President and part owner of Stealth Components, Inc., a distributor of computer components, was sentenced today in connection with a scheme to avoid paying over $385,000 in antidumping duties. Federal District Judge Douglas P. Woodlock of the District of Massachusetts sentenced Smith to 3 years of probation, the first 4 months of which are to be spent in community confinement, to be followed by 8 months and 1 day in home detention with electronic monitoring. Smith was also ordered to pay a $30,000 fine.

In May 2005, Smith pleaded guilty to a seven-count indictment charging him with conspiracy and false statements. Smith admitted that from November of 1998 through May of 2000, he and others participated in a scheme to defraud U.S. Custom's in order to minimize the payment of antidumping duties that Stealth was required to make on imported Korean Dynamic Random Access Memory chips (DRAMs). The scheme involved the presentation of false and fraudulent invoices to U.S. Customs that undervalued the purchase price and falsely described the Korean DRAMs that Stealth imported in order to lessen the cash payment amount for antidumping duties that Stealth was required to make. It was alleged that Smith directed foreign suppliers to prepare fraudulent invoices and other">International Trade Law News: "Company President Sentenced in Connection With Scheme to Avoid Paying Antidumping Duties
Bernard Smith, the President and part owner of Stealth Components, Inc., a distributor of computer components, was sentenced today in connection with a scheme to avoid paying over $385,000 in antidumping duties. Federal District Judge Douglas P. Woodlock of the District of Massachusetts sentenced Smith to 3 years of probation, the first 4 months of which are to be spent in community confinement, to be followed by 8 months and 1 day in home detention with electronic monitoring. Smith was also ordered to pay a $30,000 fine.

In May 2005, Smith pleaded guilty to a seven-count indictment charging him with conspiracy and false statements. Smith admitted that from November of 1998 through May of 2000, he and others participated in a scheme to defraud U.S. Custom's in order to minimize the payment of antidumping duties that Stealth was required to make on imported Korean Dynamic Random Access Memory chips (DRAMs). The scheme involved the presentation of false and fraudulent invoices to U.S. Customs that undervalued the purchase price and falsely described the Korean DRAMs that Stealth imported in order to lessen the cash payment amount for antidumping duties that Stealth was required to make. It was alleged that Smith directed foreign suppliers to prepare fraudulent invoices and other"

Specter of failure haunts WTO trade talks

Specter of failure haunts WTO trade talks


"The consequences of failure would be an even further switch to [bi-lateral] Free Trade Agreements [FTAs] and long-term weakness for multilateral trade. Trade would become more discriminatory," said Razeen Sally, visiting senior research fellow at the Institute of Southeast Asian Studies (ISEAS) in Singapore.

Specter of failure haunts WTO trade talks

CRUCIAL: The WTO meeting in Hong Kong in December is supposed to secure a framework agreed on in the 2002 Doha trade round, and failure could be disastrous for Asia

AFP, HONG KONG

Monday, Oct 10, 2005

Asian member states have as much at stake as anyone in reaching an overall trade accord at the Decem-ber WTO meeting in Hong Kong in December, with failure possibly costing hundreds of billions of dollars and increased protectionism in their key US and EU markets, analysts say.

The prospects of success vary almost by the day — most officials will voice guarded optimism or hopes but in preparatory talks, there has been little sign of the major concessions necessary for an accord.

The December meeting is meant to secure a framework agreement that would put the 2002 Doha trade liberalization round, supposed to be concluded by the end of next year, back on course after it ran into the sands in Cancun, Mexico in 2003.

Key issue

The key issue then — freer access for industrial goods and services against removal of protectionist tariffs on agriculture — is still largely unresolved and if that remains the case in December, the consequences could be severe.

"The WTO meeting in Hong Kong is crucial for the successful conclusion of the Doha round," said Haruhiko Kuroda, president of the Asian Development Bank (ADB).

"I hope the meeting will bring about a significant if not a complete accord. If it fails, Asian countries may face protectionist pressures from the United States and Europe," Kuroda said.

With China tangled in disputes over its massive textiles exports to the US, having just resolved similar problems with the EU, that prospect cannot be a happy one — but it could be even worse.

Consequences

"The consequences of failure would be an even further switch to [bi-lateral] Free Trade Agreements [FTAs] and long-term weakness for multilateral trade. Trade would become more discriminatory," said Razeen Sally, visiting senior research fellow at the Institute of Southeast Asian Studies (ISEAS) in Singapore.

Sally, who is sceptical an overall accord can be reached in Hong Kong, said FTAs, which many in the region have promoted, are not enough for Asia which needs "a healthy multilateral trading system in a reasonably stable international political environment."

For some analysts, it is this downside of any failure that makes the most compelling case for compromise in efforts to get an agreement.

Will Martin, lead economist at the World Bank’s development research group, Trade, said that given the potential gains, he is hopeful some agreement can be worked out.

"I’m optimistic about the possibility of an accord being reached, although there are many difficulties in the path," he said.

"The potential gains [from trade liberalization] are huge — we estimate in the order of US$290 billion per year — too large for policy makers to let slip through their fingers," he said.

WTO Negotiations -- US & EU are willing to restrict the Farm-Subsidies

US prepared to cut its farm subsidies by 60 percent

Mon Oct 10, 2005 8:22 AM GMT

By Sophie Walker and Doug Palmer

WASHINGTON (Reuters) - The United States is prepared to cut its most trade-distorting farm subsidies by 60 percent in the next five years and eventually eliminate them but wants deeper cuts by the European Union and Japan, U.S. Trade Representative Rob Portman said on Sunday.

Striking a deal to cut rich nations' agricultural supports and tariffs is seen as vital if world trade talks are to make progress in lowering barriers on goods and services globally and agree on a blueprint for doing so at a World Trade Organization meeting in Hong Kong in December.

Washington has been under pressure for weeks to come forward with a plan but U.S. negotiators have been loathe to move without more progress on how much other countries would cut their farm tariffs to open their markets to American farmers.

In an opinion piece to be published in the Financial Times on Monday, Portman said the United States wanted to see steep tariff cuts during the next five years, starting from 55 percent up to 90 percent in the highest tariffs in rich countries. In a second stage, tariffs should be brought down to zero, he said in the article, the text of which was obtained by Reuters in advance of publication.

Portman and other American trade officials will host a meeting on Monday in Zurich of their counterparts from the European Union, Brazil, India and a dozen other key World Trade Organization members.

"A ground-breaking result in agriculture is not in and of itself a sufficient outcome," Portman said. "There must also be complementary advances in trade in manufactured goods and services. The U.S. is ready to make tough decisions on agriculture but we cannot do it alone."

The United States also will urge the elimination of export subsidies -- already agreed under a framework agreement struck last year -- by 2010, Portman said.

The EU has proposed a 65 per

Weaving the fabric of growth

Fe Icra Study

INDIAN TEXTILES INDUSTRY



Increase in productivity and overseas expansion in conformity with WTO regulations still pose a challenge



WEAVING THE FABRIC OF GROWTH INDUSTRY STRUCTURE

The textiles industry accounts for around 20% of India's industrial production and 25% of its total exports. Besides, it provides employment to over 20 million people. Cotton is the most important segment of the textiles industry, accounting for around 55% of the domestic fibre consumption and exports. With over 9 million hectares under cotton cultivation (which is the largest area employed for the purpose throughout the world) and an annual crop of over 3,500 million kg, India is the third largest producer of raw cotton in the world, after China and the US. However, during the last decade, while the production of cotton fabric has stagnated, the manmade fibre based fabrics have shown a strong growth. Currently, with a significant portion of cotton being exported in the form of yarn, fabrics and apparel, manmade fibre-based textiles have a nearly 60% share in the household market.

The textile and clothing industry is highly fragmented. Even Vardhman group, which is the leading player in the cotton yarn segment (yarns are less fragmented than the other segments of the textile and clothing market) has a small share of only 2%. The other major players include Forbes Gokak, Madura Coats, GTN Textiles, etc. The degree of fragmentation is even higher in the fabrics segment, wherein the small-scale sector accounts for 93% of the production. The production of denim fabrics is, however, dominated by large players like Arvind Mills Ltd.

The decentralised sector is the largest segment of the Indian fabrics industry in terms of employment, income and exports, and accounts for 93% of the total fabric production.

The role of the organised sector in fabric production has diminished over the years with its contribution declining from 70% in the 1950s to 7-8% in 2004-05. This has mainly been on account of policy restrictions relating to labour laws and the fiscal advantages enjoyed by the small-scale and powerloom sectors.

The small-scale nature of India's apparel industry has been shaped directly by policies that restricted woven and knitted apparel firms to the small-scale-industry (SSI) sector. For instance, the apparel industry has around 27,700 domestic manufacturers, over 48,000 fabricators, and around 1,000 manufacturer-exporters. Most apparel manufacturers (80%) have small operations (with <20 sewing machines) while 99% of them are proprietorship-/partnership-type establishments. The technologies for processing cotton textiles and apparel in India also cover a broad range of technological sophistication Because of the predominance of very small-scale fabricators in the apparel sector, most apparel is produced on a contractual basis for large manufacturers/ exporters. The fabricators specialize in low-wage, labour-intensive sewing and have the flexibility to meet small custom orders but are much less competitive with large orders and those typically involving high levels of automation. While it is not unusual for apparel manufacturing to be both relatively small-scale and independent from the upstream segments of the textile supply chain, India's apparel firms are smaller and more labour-intensive than other major exporters.

The domestic Indian clothing market is estimated to be close to Rs 1,000 billion. Being new, the readymade garments industry is estimated currently at 25% of this and has increased at a rate of 13% per annum. The branded readymade garments are estimated to be close to Rs 70 billion. The share of premium & super-premium categories has been increasing at a much faster rate as compared to the overall apparel market and would continue to do so as the base is still very low.

Indian textile and apparel exports have increased at a CAGR of 8% during the period 1997-98 to 2004-05. With India already occupying a large share in global cotton yarn market, the major growth areas during the recent past has been knitwear and cotton madeups. India's share of apparel exports is low at around 3%. Indian apparel is exported to over 120 countries, the most significant among which are nations that were parties to the Multi-Fibre Arrangement (MFA) which was in existence prior to accession of textile trade to WTO. Amongst the regions, the most important export destinations for Indian apparel are the US and Western Europe, which together account for over 60% of India's total exports.

Reforms

While the quotas put restraints, they also protected the share of developing country in textile and clothing exports. While Indian yarn exports have a large share in the world, same is not true about the apparel sector. Thus, the industry needs to add significant value to its product profile. In November 2000, the Government of India came out with a new textile policy that outlines the direction of policy reforms to be followed in the near term. The steps outlined in the policy are geared mainly towards removing the bias in policy towards the small-scale sector and promoting modernisation. The government removed readymade garments subsequently from the list of products reserved for the small-scale sector.

The government announced the technology upgradation fund scheme (TUFS) in 1998 that provides for soft loans to textile companies so as to enable them to improve their productivity. The government has also announced several fiscal steps in the last five years’ budgets aimed at improving the efficiency of the textile sector (refer following table). With the removal of the protectionist bias in favour of the small-scale sector, the long-term impact of the reforms on the industry is expected to be significantly positive.

POST-QUOTA PERFORMANCE

The international textile and apparel trade has been driven by quotas provided by importing nations to the exporting nations and has been outside the purview of Gatt (General Agreement on Trade and Tariffs) and later on, WTO. Initially, the MFA (Multi Fibre Arrangement) governed the textile trade between 1974 to 1994.

The Agreement on Textiles and Clothing (ATC), the successor to the MFA, has given way to the WTO. The complete transition from MFA to WTO is expected was envisaged in four phases as the following figure shows.

At the start of each phase, apart from the removal of items under quota, the quota levels were also proposed to be increased significantly by 16%, 25% and 25% in each of the three phases. However, notably, a very small percentage of textile and clothing products had come out of the purview of quotas in first three phases. The reasons for this have been two-fold:

• Firstly, all the items of textile and clothing–whether previously quota related or not were included in the list of items on which quotas were to be removed

• Secondly, the basis of percentage of items (according to value) to be removed from quotas was on the 1990 data. Since significant growth in trade has happened over the years, as a result, developed countries could adhere to the deadlines even by removing a few of the items from the quotas. Thus, significant level of quota deregulation is happening only in the last phase of ATC, i.e., post January 1, 2005.

The accession of textile trade to the WTO presents both an opportunity and a challenge to the developing world. While there would be the new opportunities of free market, competition among the developing countries is also expected to increase, with the result that the share of the poor performers would be taken away by the good ones.

Indian textiles and clothing is competitive in the international market, as labour is relatively cheap in the country and most of the raw materials of the industry are indigenously available. However, the high power and interest costs impair these advantages to a significant extent (more so for fabric than apparel). Although the investments for modernisation are large, fiscal incentives announced by the Government in last five budgets along with soft interest regime in the TUFS scheme has provided the fillip to the Indian industry in improving its ability to compete more effectively in the emerging quota-free global environment.

During January-April 2005, i.e. after accession of international textile trade to WTO framework, India's exports to US have increased however, at a significantly smaller rate than shown by China. The developed countries' share has declined while the developing countries have increased their share.

The EU's textile and apparel import figures indicate that imports from India had a 11% growth in January-May 2005. Imports from China were up by over 36% and reached 7.4 billion Euros.

With China having joined WTO later in 2001, the developed countries can impose economic safeguards in order to limit Chinese growth. This is likely to help other developing countries including India. The US has already imposed restraints on China on the following products:

• cotton knit shirts & blouses (category 338/339),

• cotton trousers (347/348),

• cotton & man-made fibre underwear (352/652),

• combed cotton yarn (301),

• non-knitted men's and boys. cotton & manmade fibre shirts (340/640),

• manmade fibre knit shirts and blouses (638/639) and

• manmade fibre trousers (647/648).

EU has also imposed restraints on 10 categories of textiles imported from China.

INDUSTRY OUT LOOK

With China being highly competitive in textiles and clothing and large exporter of clothing (share of more than 20% already), it is likely to acquire a substantial share of the increase in market for developing countries. However, with China having joined WTO later in 2001, the developed countries can impose economic safeguards (till 2007) in order to limit Chinese growth. The ability of other developing countries (including India) in competing with China would be crucial for growth in exports from developing countries. The increased competition will not only affect India in the export markets but also threaten domestic producers with imports (especially in the high end premium fabrics and apparel).

India's textiles producers all face, primarily, the same challenge: to raise productivity through gains in efficiency that will still allow them to compete with imports; and continue to expand abroad in the face of higher cotton prices resulting from conformance with WTO rules and demand pressures. For strong growth of textiles and apparel exports post-WTO accession, the share of manmade fibre based textiles and clothing exports would have to be significantly increased in order to address larger portion of world textiles and clothing market.

Organised sector: Although the potential of the Indian textile industry is considerable, the performance of the organised sector has declined consistently. With the new textile policy in place it is expected that the new policy will give a boost to integrated players in the organised sector, who would then be able to modernise and improve the quality of the weaving sector. Further, these players also have an edge in exports and the favourable government policy coupled with changes in the international textile trade environment would result in sharp increase in performance of the efficient integrated players in the industry.

Cotton prices: In India, the prices and availability of cotton play an important role in determining the profitability of Indian textile industry. World cotton production increased significantly during 2004-05. Cotton production during 2005-06 is likely to reduce, albeit moderately and be lower than consumption by a small margin. However, high opening stocks are likely to result in moderately high availability scenario continuing over short to medium term. This is likely to result in minimal pressures on world cotton prices to rise over short to medium term. The indigenous cotton stocks are also high whereby the domestic prices of cotton are also not likely to rise over short term.

Me and My Collegue Puneet Goyal 

hi! ths is me, at my desk 

Antidumping: The Third Rail of Trade Policy

Antidumping: The Third Rail of Trade Policy
By N. Gregory Mankiw, Phillip L. Swagel
Posted: Friday, August 19, 2005
ARTICLES
Foreign Affairs
Publication Date: August 19, 2005

Not Fair

It did not take long for the newest class of U.S. senators to pledge its allegiance to one of the few trade policies that politicians of both parties overwhelmingly support. In February, seven of nine newly elected senators publicly endorsed the Byrd Amendment, a provision that encourages American companies to file antidumping lawsuits by awarding the revenues collected from the resulting tariffs to the litigating companies. The ostensible purpose of antidumping law is to help ensure competition by punishing foreign firms that sell their products at "unfair" prices in U.S. markets. In practice, however, antidumping has strayed far from this purpose, becoming little more than an excuse for special interests to shield themselves from competition at the expense of both American consumers and other American companies.

Antidumping is the "third rail" of U.S. trade politics, with few politicians of either party willing to point out its broadly negative impact. Antidumping statutes are extremely complex, and few voters understand how they work and what effect they have. Advocates of antidumping measures claim that they guarantee that international trade is competitive and fair. And who, they ask, could be against fairness? But such rhetoric bears little relation to economic reality. Rather than promote fairness and competition, the American producers who petition for antidumping tariffs--a powerful and often unrecognized lobby--use them to thwart foreign competition. In essence, "antidumping" means little more than "antibargain." If a foreign firm sells its product in the U.S. market at too attractive a price, domestic firms can threaten it with an antidumping suit that will lead to hefty tariffs and higher prices.

What is especially perverse is that the impact of antidumping tariffs falls most harshly on two groups whose interests members of Congress should be working to protect: the least well-off of their constituents and the vast majority of American producers. All Americans pay higher prices for food and housing as a result of antidumping tariffs, but the burden is likely greatest on the poor, because these necessities make up a larger share of their spending. U.S. producers are affected because most items hit with antidumping tariffs are not finished goods but components that are used to make other items. Since 1989, for example, imported ball bearings have been subject to tariffs ranging above 50 percent. U.S. manufacturers of ball bearings surely benefit, but there are many more buyers of ball bearings in the United States than there are producers--and all of them end up paying significantly more than they should and than their foreign competitors do. Antidumping practice has also become a growing obstacle for U.S. exporters.

Firms that benefit from antidumping and their allies in Congress hotly contest any change that weakens antidumping law. Yet for all their claims that antidumping policy ensures that trade is fair, it is little more than an opaque way of protecting favored industries that have powerful lobbies--doing, in the process, significant damage to everyone else.

Going Astray

Free trade benefits the world economy by pushing countries to specialize in the goods and services they produce most efficiently. Just as a shopper benefits from a sale, each nation benefits from paying less for products it buys on the world market. Antidumping law was created to address an exception to this principle: when a foreign company uses temporary low prices to drive its competitors out of a market and then raises prices, a practice known as "predatory pricing." Antidumping statutes purport to defend against this by preventing the sale of foreign goods "at less than fair value."

But defending against "predatory pricing" and enforcing "fair value" as it has come to be understood are two very different things--a distinction that is crucial for understanding how U.S. trade law has gone so far astray. As soon as one tries to define what a "fair" price is, it quickly becomes apparent that the idea is elusive. In a competitive system of world trade, where resources are allocated by the invisible hand of the market and prices are untainted by either government intervention or the exercise of monopoly power, prices are determined by supply and demand, and the voluntary nature of commerce ensures that trade benefits both parties. The debate over fair prices begins with deviations from this ideal: What if a government subsidizes a particular industry? What if a country has a single large producer that charges lower prices in more competitive markets and higher prices in less competitive ones?

Such deviations make prices seem less natural. But do they make commerce undesirable for either party? Not necessarily. If a country is a net exporter of a product, high prices are generally good; if a country is a net importer of a product, low prices are generally good, even if those prices are the result of practices that might be viewed as unfair. The notable exception to this rule is a situation in which, thanks to predatory pricing, lower prices today will reduce competition in the future. If, to use one of David Ricardo's examples, a wine supplier uses lower prices to drive competitors out of business and new firms are slow to enter the market, consumers lose out--the harm of the ensuing higher prices outweighs the initial benefits of low prices. On the other hand, if the price war lasts long enough or if the would-be predator is unable to raise prices in the end because of the entrance of new competitors, consumers are net winners. The possibility of new firms entering a market is thus a crucial constraint on anticompetitive behavior.

The precursor to modern antidumping law was the seminal Sherman Antitrust Act of 1890. Antitrust laws are intended to protect consumers from predatory pricing and other forms of anticompetitive behavior by firms seeking to establish a monopoly. By the standards of antitrust, low prices are a problem not when they simply harm other competitors, but when they threaten to wipe out competition and thereby ultimately harm consumers. In practice, this situation is rare. Firms usually cut prices as part of the competitive process, not in an attempt to thwart it. Thus, to prove that a firm is seeking a monopoly, it is necessary to show it has taken actions that do not make business sense apart from their stifling effects on competition.

Current U.S. antidumping practice is based on the Antidumping Act of 1921, which followed the example of a 1904 Canadian law that allowed the government to block imports sold at "less than fair value." (The original target of the Canadian measure was U.S. Steel; as a result of it, the company was obliged to raise the prices of the materials it supplied to build Canadian railroads in order to avoid a tariff.) The Antidumping Act of 1921 adopted this notion of "fair value," straying from the idea that antidumping measures were meant strictly to protect consumers and markets from anticompetitive practices. The act grants protection from imports as long as a company can prove that a foreign firm's actions are designed to injure or threaten to injure an American industry. If these conditions are met, the government imposes a tariff worth the "dumping margin"--the difference between the price of the imported product and its "fair value," defined as a price above the cost of production and at least as high as the price charged in the foreign firm's home market.

From an economic standpoint, selling at prices below "fair value" can be considered normal business practice. If competition in the U.S. market is fiercer than competition in a foreign market, for example, a foreign firm might be able to maximize profits by selling its products in the United States at lower prices than in its home country. Rather than the result of predatory practices by foreign firms, lower prices are often the result of healthy competition; outlawing them denies American consumers the benefits of such competition. Consider as well that within the United States firms are allowed to charge different prices to different consumers. Movie theaters, for example, charge an adult more for a ticket than they charge a child, even though they each take one seat. Likewise, pharmaceutical firms can charge more for drugs in high-income countries than they do in low-income countries.

Predatory pricing is a very different matter, since it harms not only domestic competitors but, in the long run, American consumers as well. Unfortunately, U.S. antidumping law has come to ignore the distinction between the two different kinds of low prices. Since the Antidumping Act of 1921, there has been no requirement to show that dumping is predatory; one need only prove that prices are either below cost or below the price charged for a similar item in a firm's home market.

An unintended consequence of this evolution is that modern antidumping practice actually facilitates the kind of unfair and anticompetitive behavior it was intended to prevent. When a group of firms in a market tries to act in concert to keep prices high, one check on their collusive behavior is the possibility that a competitor will undercut them. Allowing domestic firms to threaten foreign competitors with antidumping action makes it easier for them to keep prices high. And not only do antidumping tariffs themselves restrict trade, but investigations into dumping also have a restrictive effect. Research by Bruce Blonigen and Thomas Prusa has shown that the mere threat of antidumping action is a valuable tool for a domestic firm trying to impede competition from abroad.

Keeping Prices High

An investigation of alleged dumping by a foreign firm typically proceeds along two concurrent paths. While the Commerce Department's Import Administration investigates whether the imported product has been sold in the United States at less than fair value, the U.S. International Trade Commission (ITC) investigates whether a domestic industry has been injured or threatened with injury by the allegedly dumped imports. If both dumping and injury are established, a tariff is levied equal to the dumping margin.

These tariffs have a substantial impact on trade, and that impact has grown considerably in recent years. Antidumping tariffs are often substantially larger than other kinds of protection. One study found that antidumping duties are on average 10 to 20 times higher than normal tariffs. And once imposed, antidumping tariffs are not easily removed. Although they can be lifted after a "sunset review" that occurs every five years, they carry no fixed time limit and therefore tend to last for considerable periods. The Department of Commerce lifted tariffs in only two of the 314 cases it reviewed between 1998 and 2000. Recently, the increased use of discretion by Department of Commerce staff in calculating dumping margins has led to an increase in antidumping tariffs--an increase that has nearly reversed reductions in dumping margins resulting from rule changes agreed to by Washington in 1995 during the Uruguay Round of international trade talks.

These antidumping measures do considerable harm to both American consumers and American business. Research by Michael Gallaway, Bruce Blonigen, and Joseph Flynn found that in 1993 antidumping and antisubsidy tariffs (the latter are meant to counteract the effects of foreign subsidies) had economic costs of $4 billion ($5 billion in today's prices), with most of the harm caused by antidumping tariffs, which outnumber antisubsidy measures by more than three to one. Since then, the economic cost of antidumping laws has likely increased. Although average antidumping tariffs have fallen somewhat since 1993, from 50.6 percent between 1991 and 1993 to 41.9 percent between 1997 and 1999, the value of imports affected has increased substantially. Some $14 billion worth of imports were covered by antidumping tariffs approved between 1994 and 2003, up from $8.34 billion between 1984 and 1993.

Most antidumping tariffs are levied on components used in the production of other goods rather than on items sold directly to consumers. As a result, "downstream" firms using the affected items as production inputs face higher costs. U.S. automakers, for example, must pay more for steel, making their cars less competitive against imports. This is the case even if they use no imported steel, since domestic steel firms can raise prices behind the antidumping barrier. In some cases, the impact is large enough to cause American firms to shift jobs out of the United States. Antidumping tariffs of 62.7 percent imposed in 1991 on flat-panel displays prompted U.S. companies to shift production of notebook computers from the United States to Asia, since imports of whole computers did not face the punitive tariff. Toshiba closed a California production facility to open one in Japan, and Apple Computer set up a facility in Ireland rather than stick to its original plan of assembling laptops in Colorado.

The U.S. steel industry has long been the leading user of antidumping procedures: nearly half of antidumping tariffs imposed since 1970 have been on steel imports, and 158 of the 294 antidumping orders in force as of April 2005 were on steel products. Such tariffs continue despite strong performance by U.S. steel firms and a 45 percent jump in steel prices between December 2003 and March 2005. These higher steel prices help steel producers, but they hurt the much larger number of firms and workers that use steel. Whereas steel producers employed just under 160,000 workers in early 2005, more than 1.5 million employees worked at firms that manufacture metal products, more than 1.1 million at firms that manufacture machinery, and nearly 1.8 million at firms that produce transportation equipment such as cars and parts. One recent study found that each job saved by steel tariffs came at the cost of three jobs in steel-using industries and caused economic distortions equal to some $450,000.

Foreign firms also use U.S. antidumping laws to inhibit competition. In late 2003, imports of Chinese television sets 21 inches and larger were hit with antidumping tariffs of up to 78 percent (5 to 26 percent for most firms) as a result of a case filed by U.S. companies that assemble televisions on behalf of Japanese and Korean television manufacturers. These tariffs exclude newer digital models, affecting instead the lower-end televisions sold mainly in discount stores.

The total effect of antidumping laws probably surpasses these visible costs, because the mere existence of such laws causes firms to change their behavior in ways that are not easily measured. Just knowing that lower prices might trigger antidumping tariffs can lead foreign firms to charge higher prices than they might otherwise in order to reduce the risk of becoming entangled in trade lawsuits. In some cases, antidumping suits are resolved by "suspension agreements," under which foreign firms agree to minimum prices for goods they export to the United States. It is no small irony that the Department of Commerce sets prices in this fashion for steel plates imported into the United States from the former Soviet Union.

Antidumping tariffs change over time in ways that cause additional economic harm. After the dumping margin is calculated, foreign firms are allowed to ask for the duties to be adjusted through periodic administrative reviews that take into account any recent price increases. In theory, they can even request that the antidumping tariffs be removed after showing that import prices have risen by the same amount as the tariff. If they win, consumers face the same bottom-line price, but the U.S. Treasury no longer collects the tariff revenue. Instead, it goes to the foreign firm in the guise of a higher price. In reality, antidumping tariffs are computed so as to make it impossible for foreign firms to raise prices by an amount that precisely offsets the tariffs. Nonetheless, research has found that about half of the economic harm caused by antidumping laws stems from the impact of foreign firms raising prices after tariffs are imposed, thereby depriving American consumers of lower prices and the U.S. government of the associated tariff revenues. (The other half of the harm results from market distortions, as users of the goods affected by tariffs change their behavior in response to the higher prices.)

Absurdities

The harm to U.S. consumers and producers from antidumping law goes well beyond higher prices. U.S. exporters are increasingly hampered by the use of antidumping actions in the rest of the world. Moreover, antidumping policies have become a point of contention in international trade negotiations, threatening to undermine the mission of the World Trade Organization (WTO) and the overall expansion of free trade.

Although the United States and the European Union initiate the largest number of antidumping suits, developing countries are now the heaviest users of antidumping measures per dollar of imports. Argentina, Brazil, India, and South Africa use antidumping laws 5 to 20 times more often than the United States does. Over the last decade, only Chinese and South Korean firms have been accused of dumping more than U.S. firms.

Not coincidentally, American exporters face dumping charges in many of the markets where they have been most successful. Mexico has initiated six antidumping investigations against U.S. exports in the last year, often targeting agricultural products, including ham, beef, rice, and apples. U.S. exports to China have been growing at roughly 30 percent per year, and the number of antidumping cases filed against U.S. firms there has grown even faster. Some $286 million in U.S. exports were subject to Chinese antidumping actions in 2003, up 65 percent from 2002. The vast majority of these cases involve chemical products, with supposed dumping margins ranging from 7 to 112 percent. Research by Thomas Prusa and Susan Skeath has found that the increase in antidumping allegations is motivated, at least in part, by a desire for retaliation against U.S. antidumping actions, not by a change in the trading practices of U.S. exporters.

Recent antidumping tariffs applied to U.S. chicken exports to South Africa illustrate the frequent absurdity of the proceedings. Chicken eaters in the United States prefer white meat; chicken eaters in South Africa prefer dark meat. Since chickens come with both white and dark, this would seem to present an ideal opportunity for trade. In 1999, however, the South African Board of Tariffs and Trade (BTT) initiated an antidumping case against U.S. chicken exporters for selling below fair value. The BTT approached the question of fair value by comparing the sales price of exports to the computed costs of production (a method that has become increasingly common in recent years). But how to determine the cost of producing dark chicken meat versus the cost of producing white chicken meat? Since a "scientific" approach to this question is impossible, the U.S. exporters offered one calculation of the cost of producing dark meat while the BTT used another. In the end, the BTT judged that the two U.S. exporters involved were dumping dark meat by margins of 209 percent and 357 percent. As a result, U.S. exports of poultry to South Africa fell to a mere $307,000 in 2001, a decline of 80 percent from the previous year. These duties remain in force.

Antidumping has also become an increasingly frequent subject of WTO disputes, and the United States has fought vigorously to preserve its right to use antidumping policies. Although trade agreements offer general guidelines for acceptable antidumping practices, WTO members implement them very differently. One ongoing dispute concerns the U.S. practice of "zeroing," which allows officials to disregard instances in which foreign firms charge prices over fair value, thus offsetting supposed instances of undercharging. Consider, for example, a foreign firm that sells a product in its home and U.S. markets. Six months a year, the firm charges $10 in its home market and $8 in the United States; the other six months a year, it charges $8 at home and $10 in the United States. On average, the firm charges $9 both overseas and in the United States. But under zeroing, a U.S. official can define this as dumping, with each sale in the first half of the year assigned a dumping margin of $2 and each sale in the second assigned a dumping margin of zero (rather than -$2). Instead of letting the overpricing offset the underpricing, which would mean no tariff, the average dumping margin--and the resulting tariff--is $1. Europe's version of zeroing was recently found to be contrary to its WTO obligations. The U.S. government has asserted that its version differs from the Europeans' and is attempting to defend its practice before the WTO. The WTO is unlikely to accept Washington's defense, hinting at yet another defeat for the United States in the WTO dispute process.

Another dispute before the WTO involves the Byrd Amendment. The provision, first proposed as the Continued Dumping and Subsidy Offset Act, became law when it was attached to appropriations legislation in 2000. Even while signing the measure, President Bill Clinton noted that it was contrary to U.S. obligations at the WTO and called for its quick repeal.

U.S. antidumping law requires that a filing must have the support of a significant portion of the domestic industry in question, and the Byrd Amendment gives all firms in the industry a financial incentive to support a case by determining that a firm only receives a share of the collected tariffs if it backs the initial filing. It also gives petitioning industries a double serving of federal assistance: they benefit first from the increase in prices when antidumping tariffs are applied and then from a subsidy when the revenues are distributed. Through 2004, payments under the Byrd Amendment totaled more than $1 billion, and the Congressional Budget Office estimates that such payments will exceed $5 billion between 2005 and 2015.

A WTO panel ruled against the Byrd Amendment in September 2002, allowing countries in the European Union and several other nations to apply retaliatory tariffs against U.S. exports. The decision was upheld on appeal in January 2003. The Bush administration has repeatedly called for the Byrd Amendment to be repealed, but Congress has so far failed to act. In the meantime, the retaliatory tariffs took effect in May.

A Better Way

Addressing the excesses of antidumping policy could well play a critical role in the Doha Development Agenda talks now being conducted under the auspices of the WTO. Outright repeal of U.S. antidumping laws would certainly be the best policy for the United States' well-being, but it is politically infeasible. The Trade Act of 2002, which granted trade promotion authority to the president, requires that he provide Congress with at least 180 days advance notice before signing a trade agreement that affects U.S. antidumping law or other trade remedies. A principal objective of the act was to "preserve the ability of the United States to enforce rigorously its trade laws," including antidumping and other laws regulating unfair trade.

A second-best compromise that recognizes these political constraints could still improve on current trade law. Antidumping has two objectives: to protect U.S. firms against predatory pricing and to give them time to adjust to new levels of competition. Today's policy is not well suited to either goal. Fortunately, there are better ways to meet both. To be sure, free trade remains the ideal, but the best should not become the enemy of the good in designing and implementing trade policy.

Concerns about predatory pricing could be met by revising antidumping law to address the antitrust concerns that inspired it. Government should be able to protect against those rare instances when a foreign firm does approach the U.S. market with the intent of establishing a monopoly. But it does not need current antidumping law to do so; this can be effectively achieved by giving the Department of Justice an enhanced role in antidumping proceedings and reducing the role of the Department of Commerce.

A better way to protect industries adjusting to increased competition would be through the increased use of "safeguard tariffs," a type of trade barrier that is explicitly temporary. Increased use of safeguards may fall short of the free-trade ideal, but they cost the U.S. economy far less than do antidumping tariffs. (When tariffs are in place for more than three years, the WTO allows countries whose exports are affected by the safeguards to levy retaliatory tariffs.) Like antidumping duties, safeguards can be put in place only if the ITC determines that specific imports are hurting a domestic industry. The legal hurdle for getting a safeguard, however, is higher: unlike antidumping tariffs, which can be levied when imports merely cause material injury, safeguards are permissible only when the ITC finds that no other factor is more important than imports in causing harm to a U.S. industry. In return for the higher standard of injury with safeguards, import-competing firms in the United States do not have to show that the foreign firms took any particular actions. No consideration is given in safeguard determinations as to whether trade is fair or unfair.

The law governing safeguard tariffs also gives the president an opportunity to balance the needs of the import-competing community against the interests of the rest of the country. Although the ITC issues a recommendation, the president, according to the legislation, has the discretion to impose trade barriers as he sees fit, balancing "the short-and long-term economic and social costs" of the safeguard tariffs with "other factors related to the national economic interest of the United States." And in return for trade barriers, the domestic industry must put forward a plan for adjustment and show progress in making the adjustment--or face the prospect of having the safeguard tariffs removed by presidential action.

Proponents of antidumping measures frequently point to the hostile reception safeguard actions have received at the WTO. A series of WTO rulings has indeed made it difficult for the ITC to find that imports hurt an American industry at least as much as any other cause. A useful negotiating goal in the Doha negotiations would be to clarify the rules governing safeguards in the WTO so as to facilitate their temporary use. Meanwhile, Washington should amend the administrative procedures to remove zeroing, rather than wait for a WTO panel to force the issue. Such a move would reduce dumping margins and avert another U.S. defeat at the WTO. Each such loss is a blow to public and congressional support for an institution that is a powerful force for improving global economic conditions and promoting international cooperation.

In international trade negotiations, a government will typically offer as "concessions" actions that are economically desirable but politically difficult at home. In a sense, each party in a trade negotiation uses the need to make concessions to the other side as an excuse to undertake actions that, absent politics, it should be willing to make on its own. The U.S. economy has benefited enormously from the liberalization it has "conceded to" in decades of trade negotiations. Any move to limit the use of antidumping policy would certainly be cast as a major concession as well. It is a concession Washington should be eager to make. Such a change would offer great benefits to both American consumers and American producers and pave the way for a return to antidumping's original purpose: ensuring rather than restricting competition.

Phillip L. Swagel is a resident scholar and Greg Mankiw is a visiting sholar at AEI.

Doha trade talks fail to achieve progress on textile tariff reductions

WTO members to try again in September

Doha trade talks fail to achieve progress on textile tariff reductions

17 August 2005 - The Doha round of trade talks at the WTO, aimed at reducing trade barriers, have failed to make any progress. Stumbling blocks to talks have centred on agricultural subsidies paid to farmers by governments in the developed countries. Poorer countries oppose this and are refusing to remove tariffs on industrial goods and services including textiles.

The 148-member WTO has now broken-up for the summer after having, up until now, failed to make any headway on liberalisation of world trade. The talks were launched in the Qatari capital of Doha, four years ago.

The Doha round is looking into advancing the world free-trade agenda on the basis of opening up markets by lowering protective measures such as quotas and tariffs.
Textiles and tariffs

Textiles form a decisive part of the Doha round of negotiations. For many developing countries, this represents an important part of the manufacturing sector and, in many cases, fledgling textile production is still at a vulnerable stage.

Any progress on textiles in the talks has been slow mainly due to the impact of world textile quota removals at the start of the year.

A recent meeting in Paris between the US Trade Representative, Rob Portman and his European counterpart, Peter Mandelson showed agreement by the two sides to work harder for a concrete outcome of talks.

US textile associations are urging Portman not to give too much away in a rush for an agreement.

They say US tariffs on textiles and apparel entering the giant North American economy are "the lowest in the world" - roughly 14 percent.

An agreement would be welcomed, however, so long as tariffs in other countries are brought down to the US level before seeking further cuts.

US Senator Elizabeth Dole representing North Carolina has urged US Trade Representative Rob Portman to especially take into consideration the needs of textile companies during these talks.

"It is my hope that you (Portman) will be able to lower export barriers for US-produced textiles, and only permit for US tariffs to be reduced on a reciprocal basis", said Dole.

Any protection hoped by Dole would still be reliant on a deal and such a deal is based on mathematical formulae for cutting tariffs being acceptable by all 148 WTO member states.
Formulae

Poorer countries with vulnerable industrial sectors may yet benefit from an EU-backed formula. A statement from the EU said it would not push for tariff cuts for weak countries as part of the Doha round.

"This", it says, "will allow least developed countries to open sensitive sectors at a pace determined by their development needs".

The formula could therefore grant Least Developed Countries (LDC) the right to temporarily retain limited access to particularly vulnerable sectors.

Six different proposals for tariff-cutting formula have been put forward but without concensus. A stumbling block is China who is keener on liberalisation than Latin American countries with fragile industrial sectors.

The problem is that developing countries cannot agree amongst themselves as to who should be allowed to protect what.

Brazil and others recently refused a EU proposal that would have produced a numerical assessment on the openness of each country's services markets are (as with the farm talks).

"It has become evident to me that we have reached an impasse...on the most fundamental element: the formula", reported the Chair of industrial discussions, Stefan Johanneson.
The way forward

Although there is much debate and little concession at this point, all major players regard a successful outcome in Hong Kong as both highly desirable and highly likely as there is, according to Peter Mandelson, political will on all sides.

The EU urges that developed countries should not expect tariffs in developing countries to come down. Richer countries, also, should be prepared to do more.

With rising sentiments of protectionism in Washington, future US trade agreements could be however scuppered. With the end of President Bush's "fast track" system in 2007 that allows for the President to put forward bills on free trade to Congress on an all or nothing basis, successful completion of the Doha round has added importance.

EU not ready to grant China market status

Seattle Post-Intelligencer: AP - Business: EU not ready to grant China market status: "EU not ready to grant China market status

By PAUL AMES
ASSOCIATED PRESS WRITER

BRUSSELS, Belgium -- The European Commission said Wednesday it was not ready to grant market economy status to China - a move that would help Beijing avoid punitive antidumping measures.

Francoise Le Bail, chief spokeswoman for the European Union's head office, said it was unclear when China would meet EU criteria for being a market economy.

'The Commission is checking to see if China fits this criteria,' she said. 'It's a very technical process ... It's difficult to give a deadline.'

On Thursday, Commission President Jose Manuel Barroso was to visit China for talks focusing on trade and political cooperation.

In a statement, Barroso noted that the EU last year replaced the United States as China's largest trading partner, with annual trade totaling 174 billion euros ($212 billion). China is the EU's second-largest trade partner, after the U.S.

'Our challenge now is to understand China's dramatic re-emergence, to learn to work better with this tremendous country and seize the opportunities provided by its unprecedented growth,' Barroso said.

Nevertheless, Barroso will face a number of tricky issues in Beijing, including EU nations' failure to agree on lifting a 15-year arms embargo on China, surges in Chinese footwear imports and long-standing human rights concerns.

Australia granted China market status in April, but many of Beijing's other trading partners have held back because of concerns that Chinese authorities still interfere too much in business.

London's Financial Times last week quoted Ian Pearson, Britain's minister of state for trade, as saying his government was talking with its EU partners on the subject. 'We in Britain believe China should be granted market economy status,' he was quoted as saying during a visit to China.

The market label is a prized commodity. Among other benefits, it allows countries to provide their own evidence when they are accused of price-fixing on the international export market.

As world trade opens up, such accusations are becoming a favorite way of erecting alternative trade barriers.

During Barroso's five-day visit, he planned to meet President Hu Jintao and Prime Minister Wen Jiabao in Beijing, and to travel also to Hong Kong and Macao."

CIT Issues Opinion Resolving Duty Drawback Adjustment Issue in Antidumping Cases

Senior Judge Tsoucalas of the U.S. Court of International Trade (CIT) on 12th May 2005, issued an opinion that conclusively resolves a major issue involving the duty drawback adjustment used in many U.S. antidumping cases. In Allied Tube & Conduit and Wheatland Tube v. United States, Slip Op. 05-56 (May 12, 2005), the U.S. standard pipe industry appealed the U.S. Department of Commerce's (DOC) decision to grant a duty drawback adjustment in calculating the Borusan Group's (Borusan), dumping margin in the 2002-2003 antidumping review on standard pipe from Turkey. Borusan is Turkey's leading producer and exporter of steel pipe and tube products.

In its brief submitted to the CIT, DOC contended that it properly applied its standard two-prong test for granting a duty drawback adjustment and properly determined that Borusan satisfied the requirements of the test. DOC also stated that it verified that Borusan paid duties upon inputs used in the production of merchandise sold domestically. Borusan's brief noted that there is no additional requirement in U.S. law that a respondent must show that it paid duties on other imported raw materials or that its home market price was based on a duty-inclusive cost. In any event, Borusan stated that it had provided evidence during the sales verification that it paid import duties on imported raw materials.

In an opinion issued only 15 days after the oral argument, Judge Tsoucalas found that that the statute is clear on its face and neither U.S. law, CIT precedent or DOC's practice required Borusan to prove that it paid import duties on inputs used in the home market. Moreover, Judge Tsoucalas held that DOC's determination that Borusan satisfied both prongs of its standard two-prong test for duty drawback adjustments was supported by substantial evidence and in accordance with law. As a result, the court denied Allied TubeÂ’'s claims in all respects and found that DOC properly granted Borusan's duty drawback adjustment.

World Antidumping Statistics & India

The WTO-Antidumping statistics reveals a down-trend in "New AD-initiation" and "New AD-Final Measure" activities for the second half of Y2004 (i.e. 1st July 2004-31st July 2004) with respective to the corresponding period of 2003.

New AD-Investigation Initiations

§ EC topped the AD-initiator’s list with the 17 New AD-Initiations (), followed by China (16), India (14 ), Turkey (12 ) and USA (4 ). However, Argentina, Brazil, Indonesia, Israel, Korea, South Africa and Thailand Initiated five or fewer "New AD-Initiations".

§ China remains the most frequent target for new-AD-investigations (25), along with Korea (12) and Followed by Brazil and Chinese Taipei (6), Japan and USA with 5 new Ad-Initiations.

§ Sector breakup shows that products from Chemical sector are prime target (25) followed by the Plastics (16) and base metals (12) new AD-initiation.

§ Out of 16 Initiations, China initiated 13 AD-initiations from Chemicals and remaining 3 from Plastic sector.

§ India (total 14) initiated 7 Ad-initiation from Chemical Sector and 5-from Plastic sector.

§ EC Initiated 10 out of its 17 Initiation on products in Base metal sector followed by 3 and 2 initiations, respectively from chemical and plastics sector.

New Final AD-Measures

§ India topped the chart with 23 New Final AD-measures, followed by Turkey with (12), China with (10) , Korea (9), USA (8), Indonesia (6) and Maxico (4).

§ However. China was topmost target for these "New AD-final measures" (25), followed by USA (9), India and Korea (8 each), Chinese Taipei (5).

§ Sectoral Breakdown reflects the following trend, Chemicals (29), Plastic (20), base metals (15) and Textile (11).

Reach-- New EU Chemical Legislation

GT_200503.pdf (application/pdf Object)

REACH:NEW EU CHEMICALS LEGISLATION
Martin Ouwehand | ouwehandm@eu.gtlaw.com | 31 20 301-7402
Erik Zietse | zietsee@eu.gtlaw.com | 31 20 301-7405

In the European Union (EU), over 40 Directives and Regulations currently exist that regulate and control the
use of chemicals. It is believed that the number of chemicals available in the market varies between 30,000
and 100,000. Because of the numerous legislation that is found in a myriad of separate laws, it has been
decided to implement more transparent and efficient legislation for the control of chemicals produced or
used within the EU.

In 2003, the European Commission adopted a proposal for a new EU regulatory framework. Under the proposed
new system called REACH (Registration, Evaluation and Authorization of Chemicals), companies that
manufacture or import more than one ton of a chemical substance per year will be required to register the
material in a central database.The aims of the proposed new regulation are to improve the protection of
human health and the environment while maintaining the competitiveness and enhancing the innovative
capability of the EU chemicals industry. Additionally, REACH would give greater responsibility to the industry
to manage the risks from chemicals and to provide safety information on the

International Trade Law News

International Trade Law News: "April 23, 2005

BULLETIN: U.S. Companies Urged to Assess Impact of Basell Sale on Their Operations
BULLETIN: As recently reported by Bloomberg and other news sources, Royal Dutch/Shell Group and BASF AG the owners of Basell NV ('Basell'), the world's largest producer of polypropylene and advanced polyolefins products, are seeking to sell their stakes in the company. Basell has manufacturing operations in 20 countries, including plants in Louisiana, Tennessee and Texas. According to these reports, the leading bidder for Basell appears to be Iran's National Petrochemical Company (NPC), owned by the Government of Iran. NPC is competing against a consortium that includes India's Haldia Petrochemicals, the Chatterjee Group and several U.S. investors, for the right to purchase the company.

While it appears that Basell's U.S. operations will be excluded from a sale to NPC due to the U.S. sanctions on Iran, the broad reach of U.S. sanctions may prohibit foreign subsidiaries of U.S. companies from purchasing products made by Basell outside the U.S. In addition, such a sale may have a negative impact on the availability and price of polypropylene and polyethylene raw material in the U.S. and abroad.

U.S. companies and their foreign subsidiaries that purchase polypropylene, polyethylene and other products from Basell's U.S. or non-U.S. plants or purchase parts, components and packaging materials produced from polypropylene and polyethylene, are urged to consider the impact of the sale of Basell to NPC on the their operations.

We are closely following this matter for several clients and have some information that may be useful to companies that purchase polypropylene, polyethylene and other products from Basell. Please contact us at info@djacobsonlaw.com for more information on this important issue."

Businessworld: Against the flood

Businessworld: Against the flood: "TEXTILES
Against the floodTEXTILES
Against the flood
India is finding it tough to hold its own as China's textile exports are surging dramatically.
Latha Jishnu

Stitching a success: Chinese garment makers are busier than ever post quota.


COTTON skirts from India are proving to be more popular than ever in the US, although the synthetic variety has shown a small dip. Together, a total of 15.85 million skirts (15,851,664 to be precise) were exported to the US in the first three months of 2005 alone, compared with 22.75 million skirts (or 22,750,776) for the whole of 2004. In other words, exports have been booming since the US, like the European Union and Canada, lifted their decades-long textile quotas from January 2005.

Cause, indeed, for celebration as this is the first sign that the end of the quota regime is helping the Indian textile sector to burgeon. According to the latest US import figures released by the Office of Textiles and Apparel (OTA), India's exports of cotton skirts from January to March this year have shot up by 211 per cent compared with the same period of 2004.

Now comes the damper. Chinese skirts of both varieties are doing even better. From sales of just 9.29 million in 2004, exports have soared to dizzying levels since quotas were dismantled. For the first three months of 2005, China exported 20.97 million skirts - a scorching 1,102 per cent increase over the comparable period for 2004. In short, India is no longer skirt king.

It is the same story in a host of other cotton apparel items (see 'Where It Hurts Most') although a caveat is in order here. The OTA figures are provisional and are being revised periodically. It provides just the volume of growth and not the values. But all the same it is significant because the US is India's top market for textiles, accounting for close to a quarter of its fabric, made-up and yarn exports and nearly a third of its garment exports. The OTA data is the clearest indicator so far of what India's post-quota outlook is in the short term.

In some significant respects, it outlines a dismaying prospect for a country that has been widely projected as one of the two clear winners in a world without quotas. Take, for instance, what has happened to cotton dresses, a category where India has a clear edge. Exports went up by 24.61 per cent to touch 4.96 million units. This is a creditable performance till one looks at the other players. Here again, China whooshed past with exports of 5.64 million dresses - a growth of 268 per cent over the comparable figures for the previous year. The more telling figures are that in 2004, its total exports of dresses was just 3 million whereas India's exports were well over 11 million. India is no longer dress king either.

Although it was widely accepted that China would race ahead, the OTA figures are disquieting even if some industry representatives point to the "generally respectable growth rates (36-117 percent)" in a range of items, from knit shirts, woven blouses, slacks and trousers, to baby garments.

In made-ups, too, India has patched together a success of sorts. An increase of over 66 per cent has pushed cotton sheets exports to 25.41 million square metres - putting it just behind China's 25.88 million sq. m (a fierce 229 per cent growth) - and pillowcases to nearly 5 million sq. m, putting it a wee bit ahead of its main rival. However, it slipped on pile towels, a 7 per cent decline in exports allowing Pakistan to emerge as the clear leader. In fact, in several categories, cotton dresses among them, Pakistan is snapping at India's heels.

Knit fabrics recorded a creditable 235 per cent jump to touch nearly 8 million sq. m, along with handsome increases in other non-woven fabrics. Ditto for some wool items. In manmade fibres, where India is present only in niche products, the performance, on the whole, was dismal with declines recorded in 18 categories.

So is India doing well or badly? That would depend entirely on which segment of the industry one is speaking to. While the government says it is too early to tell, disquiet has begun to surface.
Exports by Indian units, have been constrained by lack of capacity.


Arumugam Sakthivel, chairman, Apparels Export Promotion Council (AEPC), admits life after quotas is not rosy. He says exports in the first three months of 2005 have grown just 7-8 per cent and "the prospects are not as good as we expected. We are being beaten down on prices by China, among other things and we could even end up with a negative growth this year".

Apart from the big edge that a pegged yuan rate gives China, its exporters also enjoy major tax incentives. The AEPC chief's immediate worry is the cut in the duty drawback scheme, which was changed in January from a value-based rate to a weight-based structure. This was done to discourage the misuse of the facility by exporters who were inflating their invoices. But, effectively, it has brought down the drawback rate from 10.5 per cent to around 3.25 per cent. Points out Sakthivel: "China gives its exporters a straight 13 per cent refund of VAT. How can we compete?"


As Chinese textiles flood the world, and calls mount in the US and EU for import restraints, every statistic on textile exports is being put under the microscope. On 19 March, China's ministry of commerce released figures for January and February that showed that its post-quota growth in non-garment exports has been phenomenal. Exports were up 33 per cent to touch $ 5.21 billion, primarily on the back of a sharp rise in prices of man made fibre (MMF) fabrics and made-ups. And apart from surging sales to the US and EU (63 per cent and 57 per cent respectively), China had made significant inroads into South Korea, Iran and Bangladesh.

"Where is the surprise in this?" asks Sudhir Dhingra, chairman and managing director of Orient Craft, one of the top garment exporting firms. "If there is growth in India's exports, it is cause for celebration, but otherwise, there is no point in these comparisons." True enough, given China's huge capacities and huge market share (see 'Too Little, Too Late', BW 15 November 2004). Some industry experts had warned last year that India would fail to make capital of the first two years of a quota-free world.

As Dhingra stresses, China is ahead of us by at least 10 years, because of the government's unwavering focus on the textile sector; in India, on the other hand, the government has choked the mill sector. "Now, we have the results and it should not surprise us," he says.

India has so far released provisional figures for just January and these are far from reassuring. Preliminary data compiled by the directorate-general of commercial intelligence and statistics (DGCIS) reflect a 7.6 per cent dip in exports in January at $1.16 billion. However, the textile ministry thinks it is too early in the year to see a definite trend, specially since the figures of exports to the US have shown an overall 20 per cent rise in volumes.

There are others, too, who believe that too much is being read into these provisional figures. The Indian Cotton Mills Federation points out that a true picture will not emerge till much later on what impact the abolition of quotas has had on India's textiles exports. Its secretary-general D.K. Nair maintains that Chinese competition to our present lines of production is minimal. Countries which will be hurt in a world without quotas will be Bangladesh, Sri Lanka, Vietnam and Cambodia. And though the market leader will grow much faster than India, "China," he declares, "is not growing at our expense."

Such a view does not take into account the fact that China has already displaced India in the US as the leading supplier of cotton skirts, dresses and bedsheets. Going by past performance, it is not unlikely that China's scorching growth will cut into India's lead in other segments, too. In 2002, quotas were lifted on three categories: bras, vegetable fibre garments and silk blend garments. In none of these did India make much inroads while Chinese exports grew by around 200 per cent.
The flood begins: Massive capacities are helping Chinese exports, especially in the manmade fabrics segment, where India is losing out rapidly


That, as industry experts point out, was only to be expected since India did not have capacities in these categories. The popular, and comforting, view is that the textile quotas were deliberately fashioned to restrict India's textile industry. China was allowed to grow much more than India before quotas were clamped on it -which means that huge capacities had already been built up.

What the statistics may be throwing up is the fact Indian firms are operating at close to full capacities. There simply is no slack left to exploit the market opening. But Nair is hopeful that the investments that are being made will fill the gap although industry specialists like Arvind Singhal, chairman of KSA Technopak, a leading textiles consultancy, have been warning that by the time India expands capacity it may be late into 2006 or even 2007.

Given this backdrop, it is no surprise that Indian exporters are waiting to see if the US will take safeguard action against Chinese textile exports. Under the WTO accession agreement signed by Beijing, countries can imposes product specific and general safeguards on its exports till 2008.

"Investments in India are growing faster than ever. But we have no time to lose," says Nair. We have till 2008 to consolidate our position." What it means is that the China safeguards would come in handy for India.