Reuters | By Scott Hillis | Nov. 19, 2003
BEIJING (Reuters) - China struck back at the United States over a cap on selected textile imports on Wednesday, saying the move ran against the spirit of free trade and hinting at possible retaliation.
China, the world's fifth-biggest trading nation, also called off a shopping mission for American soybeans citing visa problems but raising fears that the decision was linked to the U.S. quotas on imports of knit fabrics, bras and robes.
"The Chinese government expresses deep regret and firmly opposes this decision," Commerce Ministry spokesman Chong Quan said in a statement.
"As a WTO member, China reserves the right to lodge lawsuits with relevant organizations of the WTO to safeguard the interests of Chinese industries."
The Bush administration said on Tuesday it would slap import quotas on some Chinese textiles, a move that opened a new line of attack against China, which some U.S. officials have blamed for job losses.
But the decision affects less than five percent of China's textile exports to the United States and won't come into effect for three months.
Deputy U.S. Trade Representative Josette Shiner said the safeguards provided for in China's WTO accession package were designed to temporarily slow the pace of imports.
"They were designed as some temporary speedbumps if we saw a surge in certain import areas," she told reporters during a trip focused on trade and intellectual property issues.
Chinese officials had made clear they would have preferred Washington not to invoke the safeguards but they didn't say what their response would be, Shiner said.
The quotas would cap the rise in Chinese textile shipments at 7.5 percent above the total for the last year or so, and would be in place for a year.
The move stoked fears Washington may be shifting to more protectionist policies, helping push the dollar to record lows against the euro overnight.
China's main stock market in Shanghai, which has dropped to year lows in recent days, ended higher on Wednesday, with the quotas having no immediate impact.
HOT POTATO
U.S. manufacturers say China has pumped up its trade surplus with the United States by keeping the exchange rate of its yuan currency unfairly low, giving its goods an edge in world markets.
The United States estimates its deficit with China will rise about 20 percent this year to $120 billion, a hot political issue in the run-up to the 2004 presidential elections.
"The U.S. restrictions on China's textile products have so far been symbolic as they have not covered major Chinese products such as shirt and clothes," said Guo Changsheng, textile analyst at China Southern Securities.
"But we expect the Bush administration to take further steps to restrict imports of Chinese textile products, which is likely to lead to flare-ups in trade conflicts between China and the United States."
The Commerce Ministry made no mention of possible retaliation and denied other media reports that it had canceled a delegation to buy U.S. farm goods, fertilizers and telecoms products.
But there were signs that some business would, in fact, be affected.
NO TO SOYBEANS, YES TO WHEAT, COTTON
A Chinese delegation scheduled to leave on Wednesday to buy soybeans as part of a multi-billion dollar shopping spree aimed at easing trade tensions had been delayed apparently due to visa problems.
But there were worries the abrupt cancellation was linked to the textile decision, and the news sent soybean futures tumbling at the Chicago Board of Trade.
Another delegation to buy U.S. cotton and wheat was still going ahead, traders in Hong Kong said.
Some Chinese business groups called for retaliation.
"I think we should react somehow and call on the government to do something," said Shi Jianwei, executive vice president of the China Cotton Association and head of the China Cotton and Jute Bureau.
China's Chamber of Commerce for Import and Export of Textiles said in a statement the move would "ruin the fundamental interest of Chinese textile exporters" and hurt American consumers.
The chamber also said China's imports of U.S. fabric and raw material had skyrocketed this year, jumping nearly 150 percent year on year to hit nearly $790 million in the first nine months.
The textile industry employed more than 15 million people in China, it said.
The American textile industry, which said it has lost more than 316,000 jobs since the start of 2001, praised the U.S. decision but said it should merely be a first step to putting a lid on virtually all Chinese textile imports.
A senior International Monetary Fund adviser for Asia, Steven Dunaway, called the quotas "a big risk in the current environment" and one that could prompt Chinese retaliation. ($1 = 8.276 yuan) (Additional reporting by Tamora Vidaillet and Judy Hua in Beijing, Nao Nakanishi in Hong Kong, Richard Cowan in Washington and K.T. Arasu in Chicago)Reuters:
