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U.S. IMPORT RESTRICTIONS ON CHINESE GOODS.
Term Paper ID:24870
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Essay Subject:
Background, trade agreements, politics, technology, trade deficit, quotas, future; focuses on apparel & textiles industry.... More...
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11 Pages / 2475 Words
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Paper Abstract:
Background, trade agreements, politics, technology, trade deficit, quotas, future; focuses on apparel & textiles industry.
Paper Introduction:
A PROPOSAL FOR US IMPORT RESTRICTIONS ON CHINESE GOODS: AN ASSESSMENT OF THE ISSUE
Introduction
This research assesses a proposal to limit the dollar value of imports from the People’s Republic of China (PRC) into the United States (US) to the level of the dollar value of US exports to the PRC. This assessment is made within a context that is primarily economic as opposed to political in character. Given the political aspects the relationship between the US and the PRC, however, political factors cannot be completely ignored in this assessment. As an example, an important factor in the economic relationship between the US and the PRC is the decision by the US government to grant most favored nation (MFN) status to the PRC. Within the United States, the MFN concept is highly po
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The Reagan Administration claimedthat the protection provided by the MFA is all that is justified for theindustry. Apparel jobs fall-again. Monthly Labor Review, 12 (8), 24-35. Beginning in the 198 s, textile and clothing contractproduction levels entered into a slow and steady growth trend, which isprojected to continue through the 199 s. WWD, 175(25),19. Concluding Assessment China is a developing country making the difficult transition to amarket economy. China BusinessReview, 21(3), 9-13. (1997). The PRC, as anexample, is challenged on its efforts to retain MFN status because of thatcountry's suppression of the so-called pro-democracy demonstrations in 1989(Bangsberg, 1994a). The statesman's year-book, 1997-1998. In an economic context, however,the problems faced by the two industries have been strikingly similar, andthe two industries are often considered as if they were a single industry.The unified approach to apparel and textiles is followed in this analysis,and the term textiles industry refers to both the production of fibers andfabrics and to the manufacture of finished garments. (1994, 3 February). Exports surge for China's foreign-backed textiles. Virtually all major textileimporting countries and exporting countries are signatories to the MFA.The MFA provides the general framework for textile trade restraints andallows any importer country to negotiate bilateral quota agreements withexporter countries. E. This issueargues strongly from the US perspective in favor of a fully open tradingrelationship between the two countries. During 1997, a further 59, jobs were lostin these industries, reducing their total employment at the beginning of1998 to approximately 1,391, (Ramey, 1998). Washington: The AEI Press. A major current policy effort by the government of the PRC, however,is to gain membership in World Trade organization (WTO), the successororganization to the GATT (Lardy, 1995). Journal of Asian Business, 1 , 1-15. Mending the textile rift. Under such licensing arrangements, the Chinese demand completedocumentation relevant to the technology to be acquired (Tsang, 1994). Bangsberg, P. The Chinese are highly interested in joint venture agreements, asjoint venture agreements provide the Chinese with access to both foreigntechnology and foreign capital. By contrast to the situation involving US exports to the PRC, thereverse flow of trade is comprised almost entirely of consumer goods.Chinese produced consumer goods, especially textiles, have flooded into theUS (Bangsberg, 1996). The PRC has adopted the harmonizedsystem for customs classification and statistics, reduced duties on 225items, and eliminated import taxes" (Pierson, 1994, p. In the 199 s, competition from producers in the developing countriesis more intense than it was two decades ago (Islam, 1994). China conducts much of its foreign trade under bilateral tradeagreements with other countries. China penalizes textile firms. Y. Because of the overall export-import situation involving the US andthe PRC, the US trade deficit with the PRC has grown to the be secondlargest bilateral trade deficit involving the US, behind only the US tradedeficit with Japan (Barfield, 1997). The US government considers it essential to increaseexports, as opposed to reducing imports, as a means of balancing theinternational trade account. 1131). (Ed.). W. When apparel and textile import quotas are established by the USgovernment, direct penalties may be applied to the importers in the UnitedStates ("China Penalizes Textile Firms," 1994). F., Jr. The Chinese are also interested in thelicensing of technology from foreign countries. The value offoreign trade to the PRC, however, far exceeds the contribution of foreigntrade to the GNP, because it is through foreign trade that the PRC gainsmost of the new technology required by the country's economy. This assessment ismade within a context that is primarily economic as opposed to political incharacter. According to the terms of the 3 1 agreementbetween the PRC and the US, however, China was supposed to eliminate about75 percent of its various import controls over the period ending in 1997.While 1997 has come and gone, such of the affected import controls remainin place. Overall, regardless of the specificform of business ventures involving foreign entities, however, the Chinesehave developed and implemented a counter trade framework within which allforeign trade must be accommodated (Tsang, 1994). The special enterprisezone concept is a procedure by which the Chinese accommodate foreignbusiness entities on Chinese soil. MFN status isa manifestation of many factors. (1997, 2 June). Ideology, policy and the private entrepreneurin China. The US government generally is deeply committed to the concept ofinternational trade (Bangsberg, 1994a). H. Dodds, R. (1998, 9 February). With respect to apparel and textiles, theReagan Administration was adamant in its opposition to any additionallegislative relief for the industry. Thus far, however,the Clinton Administration continues to support MFN status for China. Both the overall US trade deficit with the PRC and the dramaticnegative effects of this trade on industries such as textiles and apparelhave led to pressures on the US government to restrict Chinese imports tothe US. Martin, D. There are many within the American textilesindustry, within government, and within the investment communities,however, who believe that the internal initiative cannot succeed in thelong-run without some assistance from government (Ostroff, 1997). (1994a, 25 August). Bangsberg, P. Daily News Record, 27(74), 2. World of Banking, 14, 16-17). The US is the largest tradingcountry in the world. It is the responsibilityof importing firms to certify that apparel and textile imports do notoriginate in countries from which such imports into the US are prohibited.It is also the responsibility of importers to certify that apparel andtextile imports originate in the countries stated on the importcertificates, and that such imports are not mislabeled in an attempt topermit imports in excess of established quotas for specific countries. The PRC has emerged on the global scene as a world power (Henriksen, 1995)during a period in which the US was left as the only global superpower.Superpower status-both economic and political, however, is widely projectedfor the PRC. Waller, A. Imports were curtailed severely. In 1984, the PRC experienced a foreign trade deficit, and thegovernment immediately implemented actions to correct the situation(Hunter, 1997). In the contemporary environment, MFN status is affected primarilyby human rights concerns and by economic orientation. Trade investment: Emerging policies. Withinthe United States, the MFN concept is highly politicized, and when theawarding of MFN status to the PRC is at question, the issue becomespolitically explosive in the US. 134thed. Stitched up. Further, thePRC is in a strong position to pursue growth in foreign trade, because,unlike most developing countries in the 198 s, the PRC did not amass a hugeexternal debt (Yadong & Min, 1995). Law and Policy in InternationalBusiness, 26(4),1119-1145. The import quotas negotiatedor unilaterally imposed by the US under the MFA are designed to protect theapparel manufacturing and textile industries in the United States. Business Horizons, 38, 32-36. (1995, Summer). By 1987, the PRC tradebalance was once again in surplus. (1995, June-July). Finnie, T. Those firms that become establishedin the Chinese market before the whole world rushes into the country willbe in a superior position to compete within the Chinese market. The world economy in 2 2 -the rise of China.Business Strategy Review, 6 63-71. Analysis of the Issue Chinese foreign trade does not account for a large proportion of thegross national product (GNP) of the PRC-less than 1 percent. Pierson, M. Independent observers,such as investment analysts, agreed with the Reagan Administration that theindustry was the most productive than at any time in its history. Jisi, W. American apparel and textile import quotas are oftenrescinded or reduced for countries accorded the MFN status. T. Evans, R. In compensation tradeagreements, foreign business entities deal with Chinese license holders, inan arrangement similar to that prevailing in the early years of thetwentieth century. (1995, Fall). East Asia-regional economic integrationand implications for the United States. Textiles and apparel trade underthe WTO. (1995, March-April). (1995, 25 June). The economy of the PRC already is one of the world's largest (Jisi,1996). The coming great powers competition.World Affairs, 158, 63-69. Apparel manufacturers and textile mills in low-wagecountries are able to damage the American apparel manufacturing and textileindustries by undercutting the costs of the American industries. (1994, 12 April). (1997, September). Generally speaking, the PRC has not imposed quotas on imports ofconsumer goods. (1995, Summer). Most US business entities tend view the foreign trade potential ofChina in the context of the country's vast population. (1997). Wall Street Journal,A15. (1994a, May-June). Textiles and apparel were among thoseindustries in the US which suffered the most (Mittelhauser, 1997).Approximately one million jobs were lost in the US textiles and apparelindustries from 1973 to 1996. Martin's Press. China BusinessReview, 21(3), 12. T. InBarfield, C. The MFA which wasfirst negotiated in the 195 s was renegotiated in 1986 and was renegotiatedagain in 1992. Outlook for the US apparel industry.Textile Outlook International, (73), 111-162. Thus, as opposed to restricting PRCimports to a dollar value equivalent of US exports to the PRC, the USgovernment should insist that the PRC adopt policies that lead to tradeparity between the two countries as a conduction of US support for PRCmembership in the WTO. These efforts have included theintroduction of significant new technology into production operations, andthe revising of management techniques and procedures. Far Eastern Economic Review,157(17), 69-7 . Offsets in Chinese governmentprocurement: The partially open door. (1995, July-August). What is significant is thefact that the Reagan Administration felt quite comfortable withunilaterally abrogating a part of the bilateral Chinese/American tradeagreement. Under the framework of the MFA, the United States has eithernegotiated or imposed quotas on the import of apparel and textiles into theUnited States (Martin, 1994a; Martin, 1994b). Yadong L., & Min C. Compensation trade agreements are easier tonegotiate than are joint venture agreements. While opening-up the economy of the PRCto the outside world remains a basic policy of the government of the PRC,and increased foreign trade is a major strategy in this effort, thegovernment of the PRC continues to act to preclude a recurrence of the1984 foreign trade deficit experience (Yadong & Min, 1995). This situation has prevailed in spite actions by theUS government to limit the imports of textiles from the PRC under theprovisions of the Multi-Fiber Agreement (MFA), which is, in effect,unilaterally imposed by the major textiles importing countries, of whichthe United States is one (Martin, 1994a). There can be littledoubt that these measures have been anything but highly effective inimproving productivity within the American industry. NewPerspectives Quarterly, 13, 41-45. Imports soar 28% in April: Chinadominates. Martin, D. They are, thus, favored by the Chinese. Expanding U.S.-Asian trade and investment: Newchallenges and policy options. Ramey, J. This approach also limits the level of US exports to thePRC. Far Eastern EconomicReview, 157(3), 48, 5 . (1997, August). Islam, S. The industry,however, thinks that it continues to face unfair competition from foreignproducers (Finnie, 1997). TheAmerican textiles industry has undertaken massive efforts to make itselfmore competitive internationally. Journal of Commerce and Commercial, 3A. Development of the Issue International trading relations between the US and the PRC have beenmarked by both dramatic growth and increased acrimony over the past decade. K. Changing relations between the US and the PRC, however, may changeoutlooks toward clothing imports in the United States. Barfield, C. Approximately 85 percent ofChina's foreign trade is with WTO members, and the US is highly influentialin determining which nations are admitted to the organization. China escalates modernization oftextile and garment sector. The silk surprise. One suggested response to the situation is for theUS to limit imports from the PRC to a dollar value that is the equivalentof the dollar value of US exports to the PRC. Ostroff, J. A. The American textiles industry, of course, did not agree with theassessment of the Reagan Administration, and would have preferred to see anexpansion of the quotas provided for in the MFA. In the 199 s, the bulk of clothing import shipments to the UnitedStates are products produced by contract for American manufacturers, asopposed to products produced on their own accounts by foreign manufacturers(Waller, 1994). Rather, the greatest growth in US exports to the PRC hasoccurred in the areas of (1) capital investment goods, and (2) capital,because those areas are China's primary interests with respect to incomingforeign trade (Tsang, 1994). In fact, the Bush Administrationalmost was successful in efforts to eliminate the MFA. The Americantextiles industry, without significant success, has sought legislativerelief beyond the MFA from the foreign competition on several occasions.The American textiles industry has also attempted to address its problemsthrough internal initiatives. (1994b, 29 August). As a potential economic superpower, China becomes anattractive market for foreign firms. It needs to invest large sums in infrastructure and in thetransformation of state-owned enterprises. Mittelhauser, M. Continual harping on human rights violations by critics of the PRCadd to these pressures. The PRC maintains a multi-layered system of import restrictions, animport licensing system covering broad categories which includedapproximately one- half of the PRC's imports by value, and trade rules andregulations "that lack transparency. This status, however, refers to gross domestic product and not toper capita gross domestic product. The Reagan Administration thought its actions werejustified, but, of course, the Chinese did not. E. The US-PRC trade is not only out of balance, it tends to hit some USindustries especially hard. Journal of Commerce and Commercial, 3A. As of 1 January 1997, 53 consumer items required importlicenses, including confectionery, tobacco products, coffee products,videotape recorders, air conditioners, refrigerators, washing machines,radio cassette recorders, televisions, cameras, watches, automobiles,motorcycles, skateboards, and computers (Yadong & Min, 1995). The PRC continues to face a formidableeconomic development task to raise individual and household income levelsto a point where all persons within the economy are sharing in the overalleconomic gains being achieved by the country. Lardy, N. Integrating China into the worldeconomy. The US trade deficit with the PRCexceeded US$37 billion in 1996. These agreements often provide for anexchange of Chinese raw materials for either foreign industrial goods orforeign raw materials. Rather, the PRC has limited such imports through currencycontrols, high tariffs (often in excess of 1 percent), and importlicenses for certain items. Henriksen, T. A financial primer forinvestors in China. The Reagan Administration claimed further that the basis ofpublic and congressional interest in the problems of the apparel andtextile industry was the declining employment in the industry. Employment trends in textiles andapparel, 1973-2 5. Given the political aspects the relationship between the US andthe PRC, however, political factors cannot be completely ignored in thisassessment. US textile rules biased. The "Chinese strategy is toaccelerate economic development by maximizing foreign exchange earnings andmodernizing its industry through technology acquisition. The PRCgovernment views GATT/WTO membership as vital to the country'smodernization efforts (Evans, 1995). Jacobs, B. One Chinese goal is the licensing of technology for the modernizationof existing industrial facilities, as opposed to the purchase of new turn-key projects. (1994b, May-June). T. Hunter, B. When importer and exporter countries cannot agree, theMFA permits importer countries to unilaterally impose textile import quotasor other textile import restrictions. A. The MFA provides for the negotiation of apparel and textilequotas, and these negotiations are conducted under the auspices of GATT(the General Agreement on Tariffs and Trade). Law and Policy in InternationalBusiness, 25(3), 1161-1185. Journal ofCommerce and Commercial, 1A-2A. It promotes thisstrategy through its procurement system by restricting foreign exchange useand channeling it to high priority investments such as infrastructureprojects and enterprise modernization" (Dodds, 1995, p. (1994). China's muscular nationalism. When Chinese textile and clothing imports began toimpinge on American textile manufacturers, the erstwhile free-tradingReagan Administration unilaterally imposed quotas on the import of Chinesetextiles and clothing. While the ease of doing business is advantageous undercountertrade agreements, and while the risk exposure of foreigners isgenerally lower than that associated with joint ventures, the potentialrewards may also be much lower. The greatest growthin US exports to the PRC, however, has not occurred in consumer goods(Tsang, 1994). (Ed.). (1996, Winter). China has thecapacity to flood the United States economy with low-cost garments(Bangsberg, 1994b). During the Cold War period, MFN statuswas largely determined by a countries political policies toward the SovietUnion. Apparel and textile imports into the US are also affected by thedesignation of a foreign country by the United States as a most favorednation (MFN). (1994, Spring). Tsang, E. 117 ). Countertrade agreementsare limited by the government of the PRC to the necessities (Tsang, 1994). New York: St. As an example, an important factor in the economicrelationship between the US and the PRC is the decision by the USgovernment to grant most favored nation (MFN) status to the PRC. The ReaganAdministration, however, attributed the industry's declining employmentsolely to productivity improvements, and not to the competitive pressuresof foreign producers (Jacobs, 1995). Textile trouble. The Bush Administration demonstrated no more sympathy for theproblems being experienced by the American apparel and textile industriesthan did the Reagan Administration. Apparel and textiles are often considered as separate industries, asthe latter produces the fibers and fabrics and the former produces finishedgarments from those fibers and fabrics. Thecountries most affected by MFA quotas negotiated or imposed by the US tendto be those with lower labor costs than the prevailing wages in the US,such as the PRC. Quotas for the import of apparel and textiles into the US are basedprimarily on the provisions of the MFA (Martin, 1994a). a proposal for US Import Restrictions on Chinese Goods: an assessment of the issue Introduction This research assesses a proposal to limit the dollar value of importsfrom the People's Republic of China (PRC) into the United States (US) tothe level of the dollar value of US exports to the PRC. R. References Bangsberg, P. (1994, 27 April). Joint ventures bring technology intoChina. China Business Review, 22(2), 35-38.
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