U.S. Clothing and Textile Trade with China and the World: Trends Since the End of Quotas

U.S. Clothing and Textile Trade with China and
the World: Trends Since the End of Quotas
July 10, 2007
Michael F. Martin
Analyst in Asian Political Economics
Foreign Affairs, Defense, and Trade

U.S. Clothing and Textile Trade with China and the
World: Trends Since the End of Quotas
Summary
The elimination of the last set of quotas of the Agreement on Textiles and
Clothing (ATC) on January 1, 2005, ostensibly brought about the end of decades of
quantitative restrictions on the international exchange of clothing and textiles. Trade
analysts around the world expected that the final lifting of import limits would foster
increased growth in clothing and textile trade, as well as a restructuring of clothing
and textile production. In particular, some market watchers predicted a dramatic shift
of clothing and textile production to China at the expense of many other nations.
For the U.S. domestic market, the end of the ATC quotas was expected to bring
about three major changes. First, there would be a sharp increase in U.S. clothing
and textile imports. Second, there would be a major shift in sourcing clothing and
textile imports to China. Third, the influx of clothing and textile imports was
expected to have a deleterious effect on the U.S. clothing and textile industry.
Fourth, because of the anticipated negative impact on the U.S. clothing and textile
industry, there was a belief that the U.S. government would make use of various trade
remedies to fend off the rising tide of clothing and textile imports.
The events of the first two years of post-ATC quotas — 2005 and 2006 — both
confirmed and contradicted the experts’ predictions. The global clothing and textile
market did grow faster over the last two years than before, but there has not been the
anticipated sharp shift in production to China. Similarly, while U.S. clothing and
textile imports continued to grow in 2005 and 2006, it is unclear if the end of the
ATC quotas was the main cause of that growth. In addition, while anecdotal
evidence from the U.S. clothing and textile industry indicates greater competition
from China, trade data and industry production levels do not reveal clear evidence
that the termination of the ATC was a major contributing factor to the recent loss of
employment in the U.S. clothing and textile industry.
One major factor complicating analysis of post-ATC clothing and textile trade
was the decision by the United States (and the European Union) to utilize available
trade remedies to forestall the impact of end of quantitative restrictions on clothing
and textile trade. After the United States imposed safeguard measures in 2004 and
2005, China and the United States negotiated a “memorandum of understanding” that
continued quotas on selected items until 2008.
For Congress, post-ATC clothing and textile trade has raised several issues it
may choose to consider. First, Congress may consider modifying current trade
remedy laws, particularly those dealing with safeguard measures and countervailing
duties. Second, Congress may wish to examine in more detail the impact of the end
of the ATC quotas on the U.S. clothing and textile industry. Third, Congress may
also consider examining the effectiveness of various trade preference programs,
especially as they relate to clothing and textiles.
This report will be updated as circumstances require.

Contents
History of the Agreement on Textiles and Clothing (ATC).................2
Genesis of the ATC............................................2
Mitigating Factors.............................................3
Tariffs ...................................................3
Safeguard Measures........................................4
Special Provisions of China’s WTO Accession...................4
Prognostications for Post-ATC Trade..................................5
Changes in Global Trade Flows.......................................6
U.S. Clothing and Textile Trade with China and the World.................9
Post-ATC Clothing and Textile Imports: The View from the United
States ..................................................10
Trends in Clothing Imports.................................11
Trends in Textile Imports...................................12
Impact of the Quota Phase Out..............................14
Interpreting U.S. Trade Data................................16
Post-ATC Clothing and Textile Exports: The View from China........16
China’s Clothing Exports to the United States and the World......16
China’s Textile Exports to the United States and the World........18
Comparing U.S. and Chinese Data...............................19
Impact on U.S. Clothing and Textile Industry...........................19
Domestic Production Trends................................20
Anecdotal Evidence.......................................21
Imposition of U.S. “Safeguards”.....................................22
Interpreting Pre- and Post-ATC Trade.................................26
Implications for Congress..........................................27
List of Figures
Figure 1. Indices of U.S. Clothing and Textile Imports by Quota Phase Out,
1995-2006 ..................................................15
Figure 2. China’s Clothing Exports to the United States, 1997-2006........17
Figure 3. China’s Clothing Exports: U.S. vs. World, 1997-2006............18
Figure 4. China’s Textile Exports: U.S. and the World, 1997-2006.........18
Figure 5. U.S. Clothing and Textile Production and Employment, 1990-2005.20

Table 1. Quota Phase-Out Mechanisms of the ATC.......................2
Table 2. U.S. General and Peak Tariff Rates for Clothing and Textile Imports..4
Table 3. Major Clothing Exporting Nations, 2004 and 2005................7
Table 4. Major Textile Exporters, 2004 and 2005........................8
Table 5. U.S. Net Trade Flows for Clothing and Textiles...................9
Table 6. Growth in U.S. Clothing and Textile Imports, 1990-2006..........10
Table 7. Top 5 Clothing Suppliers for the United States, 1990-2006.........11
Table 8. Top 5 Textile Suppliers for the United States, 1990-2006..........13
Table 9. Chinese Quota Utilization Rate, 2005.........................23
Table 10. Chinese Quota Utilization Rates, 2006........................24

U.S. Clothing and Textile Trade with China
and the World: Trends Since the End of
Quotas
The termination of over 40 years of quotas on January 1, 2005, ushered in a new¹
era for the global trade in clothing and textiles. An ad hoc multilateral system of
quotas — originally established as a short-term measure to allow the United States
and western Europe to adjust to emerging competition from other parts of the world
— was finally coming to an end. After 10 years of transition under the World Trade
Organization’s (WTO) Agreement on Textiles and Clothing (ATC), international
trade for clothing and textiles among WTO members was to be no longer subject to
quantity restrictions.
Precisely how the end of quotas would affect U.S. clothing and textile trade was
the subject of extensive research and some uncertainty. While many studies predicted
a shift in clothing and textile production to quota-constrained nations (i.e., those
which reached or came close to their quotas), there was disagreement on the size and
pace of the production shift. Nor was there consensus on which nations would suffer
a decline in their clothing and textile exports as a consequence of the end of the ATC.
Despite their differences in opinion on the overall impact of the end of the ATC,
most studies concurred that one of the biggest beneficiaries would be the People’s
Republic of China (China). With its large pool of low-cost skilled workers and
abundant industrial capacity, China would be able to take advantage of the clothing
and textile trade opportunities created by the removal of quotas.
However, the ability of China to expand its clothing and textile exports to the
United States faced some constraints. Under the terms of China’s WTO accession,
the United States and other WTO members retained the option to impose safeguard
measures on Chinese clothing and textiles exports if they were proving “disruptive”
to the domestic U.S. clothing and textile markets. Plus, if the United States could
demonstrate that China’s clothing and textiles exports were being subsidized in an
inappropriate manner or sold below cost, the United States could impose
countervailing or antidumping duties under existing U.S. trade remedy laws on
Chinese exports.
This report examines recent trade statistics to ascertain the initial effects of the
end of quotas on U.S. clothing and textile trade with China and the rest of the world.

¹ For purposes of this report, trade in clothing (or apparel) will refer to trade in merchandise
in chapters 61, 62, and 63 of the Harmonized System (known as the Harmonized Tariff
System in the United States), and trade in textiles will refer to trade in merchandise in
chapters 50 to 60 of the Harmonized System.

History of the Agreement on Textiles and Clothing
(ATC)
The international trade in textiles and clothing has long been subject to various
forms of trade restrictions, including quotas. Over the last 40 years, there has been
a gradual reduction of these trade barriers, generally under the auspices of either the
WTO, or its predecessor, the General Agreement on Trade and Tariffs (GATT).
Genesis of the ATC
In 1974, about 40 nations became parties to the Multifibre Arrangement, or
MFA, which replaced the Long Term Agreement Regarding International Trade in
Cotton Textiles (LTA) signed under GATT in 1962.² Originally conceived as a short-
term arrangement on the road to quota-free trade for clothing and textiles, the MFA
expanded the scope of the LTA to include wool and man-made fibers.
However, concerns about the economic well-being of domestic clothing and
textile manufacturers in both more industrialized countries (including the United
States) and less industrialized countries made it difficult to negotiate an end to the
MFA. As a result, the agreement was renegotiated four times over the next 20 years,
continuing the history of trade restraints on clothing and textiles.
In 1995, the Agreement on Textiles and Clothing (ATC) replaced the MFA,
starting a 10-year process of eliminating quotas for international trade in clothing and
textiles. The ATC’s quota phase-out contained two concurrent mechanisms designed
to gradually eliminated quantitative restrictions on clothing and textile trade. In
theory, this gradual transition period would allow clothing and textile manufacturers
enough time to prepare for the more competitive global market of the post-ATC era.
Table 1. Quota Phase-Out Mechanisms of the ATC
Accumulated Share of ClothingIncrease in Size of Quota for
Dateand Textiles Trade withoutClothing and Textile Trade Still
QuotasSubject to Quotas

1/1/9516%16%

1/1/9833%25%

1/1/0251%27%

1/1/05100%full integration
The two concurrent mechanisms of the ATC quota phase-out involved the
elimination of quotas in four stages along with the simultaneous increase in quota

² The LTA itself replaced a prior multilateral agreement known as the “Short Term
Arrangement regarding International Trade in Cotton Textiles,”which was in effect from

1961 to 1963.

limits for goods still under constraint (see Table 1). At the start of the years 1995,
1998, 2002 and 2005, parties to the ATC would eliminate quotas for a prescribed
percentage of their volume of trade in clothing and textiles. In addition, for those
products still subject to quotas, parties to the ATC would increase the quotas by a
prescribed percentage, thereby opening their domestic markets to more imported
goods. The ATC also required that products from different categories — textiles and
clothing, wool, cotton or man-made fibres, etc. — be included in each of the four
stages of the quota phase-out, in part to make it more difficult to protect a particular
segment of the clothing and textile industry during the transition.
While the quota phase-out process appeared relatively gradual in theory, it was
relatively abrupt in practice. By selecting less traded products and/or products with
under-utilized quotas for integration in the first three stages, market watchers
maintain the United States and other nations were able to prolong the period of
protection for product categories where domestic manufacturers held a larger market
share until the final stage. Industry analysts, at times, referred to the final quota
phase-out on January 1, 2005, as a “cliff,” when the quota on the most of the more
frequently traded products and the products where existing quotas were typically³
fully utilized would be lifted.
The creation of the supposed quota “cliff” was considered both a benefit and a
problem for domestic manufacturers. If companies fully utilized the 10-year window
to make their operations more competitive and cost-efficient, the maximization of the
transition period would reduce the potential shock of operating in a quota-free
market. However, if companies procrastinated making adjustments, the “cliff” only
provided the companies with a longer period of protection, and potentially a greater
shock with the quotas were lifted.
Mitigating Factors
The potential impact of the ATC on liberalizing clothing and textile trade is
mitigated by three factors. First, the ATC was limited only to the removal of quotas;
parties to the agreement could continue to impose import tariffs on clothing and
textiles. If a nation set its import tariffs comparatively high, then some foreign
companies may still be kept out of the nation’s clothing and textile market, and the
domestic manufacturers may still be protected.
Tariffs. The current U.S. tariff rates for clothing and textiles indicate that there
may be some efforts to erect import barriers on a selective basis (see Table 2).
Within the general tariff rates⁴ for each of the 14 chapters included in clothing and
textiles, there is significant variation from product to product, creating a fairly wide
range of tariffs levied on clothing and textile imports. In addition, within each

³ For example, an article in Dollars & Sense magazine (September/October 2005) on the end
of the ATC quotas was entitled, “Falling Off a Cliff,” alluding to both the potential negative
effects on smaller clothing exporting nations and the structuring of the quota removal.
⁴ “General tariff rate” is the rate levied upon imports from countries granted normal trade
relations status.

chapter, the United States has “peak” tariff rates that may be imposed on imports in
special circumstances.
Table 2. U.S. General and Peak Tariff Rates for Clothing and
Textile Imports
HS ChapterGeneral Tariff Rate RangePeak Tariff Rate

500.0 - 3.9%90.0%

512.7 - 25.0%80.0%

520.0 - 14.5%90.0%

530.0 - 14.5%90.0%

540.0 - 25.0%83.5%

550.0 - 25.0%81.0%

560.0 - 14.1%90.0%

570.0 - 8.0%60.0%

580.0 - 20.2%90.0%

590.0 - 14.1%88.5%

600.0 - 18.5%113.5%

610.0 - 32.0%90.0%

620.0 - 27.9%90.0%

630.0 - 20.9%103.0%

^So^urce^{: U.S. I}ⁿ^terⁿ^atioⁿ^a^{l T}^r^ad^{e Co}^m^mⁱ^ssioⁿ
For all but one of the chapters, the lowest general tariff rate levied is zero
percent. However, the highest general tariff rate ranges from a 3.9% to 32.0%. In
addition, the peak tariff rate varies across the chapters from 60.0% to 113.5%. These
general and peak tariff rates are comparatively high for the United States, indicating
a general pattern of protection for the clothing and textile market. In addition, the
imposition of higher tariffs on specific items within each chapter is also indirect
evidence of an effort to restrain the import of certain clothing and textile products.
Safeguard Measures. Second, the ATC’s impact is mitigated because it
does not prevent countries from utilizing “safeguard measures,” as well as
antidumping and countervailing duty cases, to block imports. A proposal in 2005
from 15 less industrialized countries to the WTO’s Council of Trade in Goods calling
for a two-year moratorium on antidumping cases after the termination of the ATC
was unable to secure the needed consensus, in part due to objections from U.S. and
European clothing and textile manufacturers.
Special Provisions of China’s WTO Accession. Third, as part of its
accession to WTO membership in December 2001, China agreed to special

provisions that allowed other WTO members to utilize two safeguard mechanisms
against Chinese clothing and textile products if the importing country believes that
the Chinese imports are causing or threatening to cause domestic “market
disruption.”⁵ The first safeguard mechanism is unique as it applies only to clothing
and textile products; a second general safeguard mechanism applies to all Chinese
exports.
The clothing and textile specific safeguard mechanism can be invoked by any
WTO member by requesting consultation with China. The simple act of requesting
consultation immediately imposes a quota on the product equal to 6% or 7.5% more
than the amount imported over the previous 12 months. Even if there is no agreement
with China on the safeguard measure, the WTO member has the option to continue
to enforce the import quota. There is no requirement for WTO notification; nor are
there provisions for multilateral surveillance. These quotas can only be imposed for
one-year without China’s agreement. This safeguard mechanism is only available
until December 31, 2008. Brazil, Colombia, the European Union and the United
States have made use of this provision.
The general safeguard mechanism is available until December 10, 2013. In this
case, the WTO member must notify the WTO’s Committee on Safeguards. In
contrast to the first safeguard mechanism, safeguard measures may only be imposed
after consultations, or in critical circumstances where provisional measures are
considered justified. Also, for this category of safeguard measures, the WTO
member has the option of imposing quotas, tariffs or other forms of import
restrictions. Plus, whereas the clothing and textile specific measures are limited to

12 months, the general safeguard measures can be imposed for up to three years.

Because of the possible utilization of various safeguard mechanisms, and the
continued option to maintain tariffs and other non-tariff trade barriers, the ATC did
not fully bring about “free trade” for clothing and textiles. Instead, it eliminated one
mechanism — and arguably the main mechanism — whereby countries altered trade
patterns for clothing and textiles. As a result, it was reasonable to expect a significant
change in the international trade in clothing and textiles after the termination of the
all ATC quotas on January 1, 2005.
Prognostications for Post-ATC Trade
Not surprisingly, there were a number of studies done to predict what would
happen to the international trade in clothing and textiles after the elimination of
quotas prior to the termination of the ATC on January 1, 2005.⁶ These studies

⁵ For more information on the China safeguards, see CRS Report RL32168, Safeguards on
Textile and Apparel Imports from China, by Vivian C. Jones.
⁶ Among these studies are: U.S. International Trade Commission, “Textile and Apparel”
Assessment of the Competitiveness of Certain Foreign Suppliers to the U.S. Market,”
Publication 3671, January 2004; “The Agreement on Textiles and Clothing: Impact on U.S.
Cotton,” by Stephen MacDonald, Agapi Somwaru, Leslie Meyer, and Xinshen Diao, Cotton
(continued...)

generally agreed that there would be shift in production to quota-constrained
countries, but differed on the amount and speed of the shift. China was repeatedly
cited in these studies as a major beneficiary of the termination of quotas.
In summary, there was a fairly broad consensus on several aspects of clothing
and textile trade after the termination of the ATC. Analysts generally agreed that:
^!global trade in clothing and textiles would grow more quickly after
the removal of quotas;
^!China and India would increase their market shares for both clothing
and textile exports, but there was no consensus on the amount of this
increase, estimates for China varied from 3% to 10%;
^!The United States would import more of its clothing and textiles
from China, ranging from one-third two-thirds of its imports;
^!U.S. clothing and textile manufacturers would reduce their
operations, shut down factories and lay off workers due to increased
competition from China, India and other suppliers; one study
estimated up to 630,00 job losses due to Chinese imports;
^!Preferential trade arrangements may buffer the impact of the quota
removal for clothing and textile manufacturers in the Caribbean,
South and Central America, the Middle East, and Africa;
^!There is a possibility that the United States, the EU, and other WTO
members may impose trade remedies in response to the increase in
imports from China, India and other Asian suppliers.
Changes in Global Trade Flows
Global trade figures for clothing provide partial confirmation of the experts’
predictions for gains for China and India in post-ATC trade (see Table 3).⁷ Between

2004 and 2005, total clothing exports increased by almost $16.5 billion, or 6.4%.

China’s clothing exports, however, rose by $12.3 billion — an increase of 19.9%.
India’s clothing exports in 2005 also rose substantially, up $1.7 billion, or 25.0%

⁶ (...continued)
and Wool Situation and Outlook (CWS-2001), Economic Research Service, USDA,
November 2001; “The Global Textile and Clothing Industry Post the Agreement on Textiles
and Clothing,” by Hildegunn Kyvik Nordås, World Trade Organization, Discussion Paper
No. 5, 2004; The American Textile Manufacturers Institute, “The China Threat to World
Textile and Apparel Trade,” 2003; “TNC and the Removal of Textiles and Clothing
Quotas,” by Richard P. Appelbaum, United Nations Conference on Trade and Development
(UNCTAD), 2005; and “Textiles and Clothing Uncertainties Before and After the Quota
Phase-Out,” by Matthais Knappe, International Trade Centre, UNCTAD/WTO, 2004.
⁷ 2006 data were unavailable at the time this report was written.

over the year before. No other major clothing exporter experienced growth of over
$1 billion between 2004 and 2005.⁸ Together, China and India captured nearly 85%
of the increase in clothing trade between 2004 and 2005.
Table 3. Major Clothing Exporting Nations, 2004 and 2005
(U.S.$ Millions)
Exporter20042005GrowthShare ofGrowth
China 61,856 74,163 12,306 74.6%
India 6,632 8,290 1,658 10.1%
Bangladesh 5,686 6,418 731 4.4%
Indonesia 4,454 5,106 652 4.0%
T urkey 11,193 11,818 625 3.8%
V i etnam 4,441 4,805 364 2.2%
United States5,0594,998-61-0.4%
Roma nia 4,717 4,627 -90 -0.5%
Mexico 7,490 7,271 -219 -1.3%
Hong Kong*8,1387,231-907-5.5%
Rest of the World139,481140,9131,4328.7%
T OT AL 259,147 275,639 16,492
^So^urce^{: W}^o^{rld T}^r^{ade Org}^aⁿⁱ^zation^,^Int^e^r^natⁱ^onal^T^r^{ade St}^atⁱ^s^tⁱ^c^s^,²⁰⁰⁶^.
^*^H^on^g^K^oⁿ^g^fⁱ^g^u^r^{e on}^l^yⁱⁿ^cl^u^d^es^dom^es^tⁱ^c^ex^port^s⁽ⁿ^ot^re-^e^x^port^s⁾
Among the major clothing exporters, the losers were Hong Kong, Mexico,
Romania and the United States. Hong Kong’s domestic exports of clothing
decreased by just over $900 million between 2004 and 2005, a decline of 11.1%.
Mexico’s clothing exports slipped 2.9%. Romania experienced a slight decline of
a little over $90 million, while U.S. clothing exports dipped by about $61 million.
For the initial year of the post-ATC era, global trade in clothing appears to be
less a story of shifting production as one of emerging centers of growth. While South
Korea and Taiwan, both modest exporters of clothing when the ATC was in effect,
experienced export declines of 23.9% and 20.0% respectively, most of the major
clothing exporters did not see a sharp drop in their exports. Instead, they witnessed
modest export increases, while most of the growth in clothing trade was concentrated
in China and to a lesser extent, India.

⁸ For this report, trade figures for the European Union (EU) are divided among the member
countries. So, while the 25 EU members as a group increased their clothing exports by $3.5
billion in 2005, none of the individual members increased their exports by more than $1.0
billion.

Global textile trade experienced a similar change as clothing, but with more
major winners and a different group of losers (see Table 4). China’s year-on-year
increase in textiles exports is nearly exactly as much as the global growth in textiles
trade for 2005. Pakistan and India also enjoyed double-digit growth in their textile
exports, and Turkey and United States experienced more modest gains that kept them
in pace with global textile trade growth.
Table 4. Major Textile Exporters, 2004 and 2005
(U.S. $ Millions)
20042005GrowthShare ofGrowth
China 33,428 41,050 7,622 100.5%
Germany 14,028 12,471 -1,558 -20.5%
United States11,98912,3803905.1%
South Korea10,83910,391-448-5.9%
T a iwan 10,038 9,706 -332 -4.4%
India 7,009 7,851 841 11.1%
Belgium 7,670 7,457 -213 -2.8%
Paki stan 6,125 7,088 963 12.7%
T urkey 6,429 7,068 639 8.4%
France 7,414 6,920 -494 -6.5%
J a pan 7,138 6,905 -232 -3.1%
Rest of World73,27273,6814095.4%
T OT AL 195,378 202,966 7,588
However, several traditional textile exporting nations saw significant declines
in their export totals in 2005. Germany, the second largest textile exporter in 2004,
saw their exports decline by 11.1% in 2005, barely holding onto its number two
status. South Korea’s textiles exports slipped by 4.1% between 2004 and 2005,
while Japan and Taiwan had their exports diminish by 3.3%. Belgium and France
also experienced minor falloffs in their textile exports in 2005.
In summary, although both clothing and textile production did shift to China and
India in 2005, it was not as dramatic a shift as some experts had predicted. Instead,
the data appears to indicate that existing clothing and textile operations continued to
produce and export in 2005 at about the same levels that they did in 2004. However,
increases in production tended to occur in China and in India.

U.S. Clothing and Textile Trade with China and the
World
As indicated in Table 3 and Table 4, the United States remains a major exporter
of both clothing and textiles. It is also a major importer of both clothing and textiles
(see Table 5). According to the World Trade Organization (WTO), the United States
imported over $80 billion in clothing and nearly $23 billion in textiles in 2005, more⁹
than any other WTO member in both categories.
One significant difference between the global and U.S. clothing and textile trade
is the relative size of the two markets. For the global market, the trade in textiles is
roughly three-quarters the size of trade in clothing. However, in the U.S. market,
total trade in textiles is about two-fifths the size of total trade in clothing, and the
value of U.S. clothing imports is about four times the size of textile imports.
Table 5. U.S. Net Trade Flows for Clothing and Textiles
(U.S. $ Billion)
20042005
Exports I mports B alance Exports Imports B alance
Clothing 5.1 75.7 -70.7 5.0 80.1 -75.1
T e xtiles 12.0 20.7 -8.7 12.4 22.5 -10.1
T otal 17.1 96.4 -79.3 17.4 102.6 -85.2
^Source:^WT^O^,^Int^e^r^natⁱ^onal^T^r^{ade St}^atⁱ^s^tⁱ^c^s²⁰⁰⁶^.
In addition, the United States runs a trade flow deficit for both textiles and
clothing, despite being a major exporter for both product categories. In 2004, the
U.S. trade deficit for clothing and textiles combined was over $79 billion, or 10.3%
of its total trade deficit for the year. In 2005, the clothing and textile deficit exceeded
$85 billion, or 10.4% of the year’s merchandise trade deficit.
Table 5 also implies that the United States did not experience a major surge in
clothing and textile imports as a consequence of the termination of the ATC quotas.
Clothing imports increased 5.7% between 2004 and 2005, and textile imports rose
by 9.1%. By comparison, total U.S. merchandise imports increased by 13.9%.
Instead, as is shown below, there was a pronounced shift in the source of
clothing and textiles imports between 2004 and 2005, and an apparent carry-over
effect between 2005 and 2006. For clothing, there was a sharp increase in clothing
imports from China in 2005, seemingly at the expense of Mexico. For textiles, China
was again the main beneficiary in 2005, and Italy and Pakistan were the main losers.

⁹ World Trade Organization, International Trade Statistic 2006, Table IV.76 and IV.84.

Post-ATC Clothing and Textile Imports: The View from the
United States¹⁰
Since 1990, there has been rapid growth in U.S. clothing imports, but
comparatively modest increases in textile imports (see Table 6). Between 1990 and
2006, U.S. clothing imports rose by $59.0 billion, or an average annual growth rate
of 14.2%. Textile imports, by contrast, increased by $7.3 billion, or an average
annual growth rate of 7.6%. As a result, the value of U.S. clothing imports in 2006
was over six times the value of textile imports.
The pattern of clothing and textile import growth is also worth noting. For both
clothing and textiles, the biggest year-on-year increases did not occur in years where
quotas were phased out as predicted by the experts. In addition, while the average
annual growth rate for clothing imports during the phasing out of quotas (1995-2005)
was slightly higher than the years 1991-1994, the average annual growth rate for
textile imports was actually lower during the elimination of quotas. Plus, both
clothing and textiles experienced year-on-year declines in 2001, possibly indicating
that the events of September 11, 2001, may have had a greater effect on U.S. clothing
and textile trade than the termination of the ATC.
Table 6. Growth in U.S. Clothing and Textile Imports, 1990-2006
(U.S. $ Billions)
Clothing Text iles Total
199024.45.630.0
199125.16.131.2
199229.86.836.6
199332.27.339.5
199435.17.849.9
199538.18.346.3
199640.38.749.0
199747.59.757.2
1998 53.3 10.0 63.2
1999 56.4 10.1 66.5
2000 63.7 11.0 74.7
2001 63.3 10.1 73.4

2002 63.8 10.8 74.6

¹⁰ Because the United States utilizes a different method for evaluating imports and exports
in its official trade statistics, the values found in tables in this section differ from those listed
in Tables 3, 4 and 5. For an explanation of the different definitions used by the United
States and their effects on international comparisons of trade data, see CRS Report
RS22640, What’s the Difference? — Comparing U.S. and Chinese Trade Data, by Michael
F. Martin.

Clothing Text iles Total
2003 69.6 10.9 80.5
2004 74.8 12.0 86.8
2005 79.9 12.8 92.7
2006 83.4 12.9 96.3
^So^urce^{: U.S. Dep}^a^r^t^m^eⁿ^t^o^f^Co^m^m^e^r^{ce, Of}^fⁱ^{ce o}^f^T^e^x^{tile an}^d^A^p^p^a^r^e^{l (}^O^T^E^XA⁾
Trends in Clothing Imports. The nation that made the greatest gains in the
U.S. clothing market between 1990 and 2006 was not China, but Mexico (see Table
7). In 1990, Mexico was not among the top five clothing suppliers to the United
States, but between 1998 and 2001, it was the clear leader, providing an average of
14.3% of the U.S. clothing imports over those four years. However, since its
accession into the World Trade Organization in December 2001, China has overtaken
Mexico, increasing its market share from 11.9% in 2001 to 22.6% in 2006.
Meanwhile, Mexico’s market share has declined from 13.0% in 2002 to 7.4% in

2006.

Table 7. Top 5 Clothing Suppliers for the United States,
1990-2006
(Market Share in Parentheses)
Year F i rst Second Third F ourth F if th
1990Hong KongChinaSouth KoreaTaiwan Philippines
(16.1%) (14.5%) (12.0%) (9.7%) (4.1%)
1991Hong KongChinaTaiwanSouth KoreaMexico
(15.9%) (15.0%) (10.2%) (8.0%) (4.0%)
1992China Hong KongTaiwanSouth KoreaMexico
(16.5%) (14.5%) (7.9%) (6.8%) (4.4%)
1993China Hong KongTaiwan South KoreaMexico
(18.0%) (12.3%) (6.8%) (6.3%) (4.9%)
1994China Hong KongTaiwan Mexico South Korea
(15.8%) (12.3%) (6.0%) (5.7%) (5.6%)
1995China Hong KongMexicoTaiwan South Korea
(13.3%) (11.3%) (8.0%) (5.2%) (4.6%)
1996China MexicoHong KongTaiwan Dominican
(14.0%)(10.2%)(9.8%)(4.8%)Republic (4.3%)
1997China MexicoHong KongDominicanTaiwan
(14.0%)(12.1%)(8.4%)Republic (4.7%) (4.4%)
1998MexicoChina Hong KongDominicanTaiwan
(13.7%)(12.1%)(8.4%)Republic (4.4%)(4.1%)
1999MexicoChina Hong KongDominicanHonduras
(14.8%)(11.9%)(7.7%)Republic (4.4%)(3.9%)

Year F i rst Second Third F ourth F if th
2000MexicoChina Hong KongDominicanHonduras
(14.7%)(11.3%)(7.1%)Republic (4.1%)(3.8%)
2001MexicoChina Hong KongHonduras India
(13.8%) (11.9%) (6.7%) (3.8%) (3.6%)
2002China MexicoHong KongIndia Honduras
(13.0%) (13.0%) (6.2%) (4.0%) (4.0%)
2003China MexicoHong KongIndia Honduras
(15.6%) (11.2%) (5.4%) (4.0%) (3.7%)
2004China MexicoHong KongIndia Honduras
(18.1%) (10.1%) (5.3%) (4.2%) (3.7%)
2005China Mexico India Hong KongIndonesia
(25.7%) (8.7%) (5.1%) (4.5%) (3.7%)
2006China Mexico India Indonesia Bangladesh
(29.1%) (7.4%) (5.3%) (4.4%) (3.5%)
^So^urce^{: U.S. Dep}^a^r^t^m^eⁿ^t^o^f^Co^m^m^e^r^{ce, Of}^fⁱ^{ce o}^f^T^e^x^{tile an}^d^A^p^p^a^r^e^{l (}^O^T^E^XA⁾
The other major changes in the top five clothing suppliers for the United States
were the gradual disappearance of Hong Kong and the more recent emergence of
India. In 1990, Hong Kong was the leading source of U.S. clothing imports, with a
market share of 16.1%. During the following 10 years, Hong Kong slid slowly down
to be the third leading source of U.S. clothing imports in 2000, with a market share
of 7.1%. By 2005, Hong Kong was the fourth largest U.S. clothing supplier, and in
2006, it dropped out of the top five altogether. By contrast, India did not join the top
five list until 2001, but since then has rapidly increased its market share and position.
In 2006, India was the third largest source of U.S. clothing imports, with a market
share of 5.3%.
The biggest annual shift in the source of U.S. clothing imports took place in
2005. China’s market share increased by 7.6%, while Mexico’s market share
declined by 2.4% of of total imports. India moved up to third place, providing 5.1%
of U.S. clothing imports, while Hong Kong had its share decline to 4.5%. Finally,
Indonesia sprang into the top five for the first time, pushing out Honduras.
In 2006, China continued to make gains in the U.S. clothing market, raising its
share of imports to 29.1%. Mexico continued to see its clothing exports to the
United States drop in market share and in value, emerging with 7.4% of total U.S.
clothing imports. India held onto third place, and Indonesia slid into fourth. Finally,
another new party to the top five appeared in 2006, with Bangladesh overtaking Hong
Kong for fifth place.
Trends in Textile Imports. The dynamics of U.S. textile imports since 1990
were similar to the pattern for clothing imports. Previously major sources of textiles
were surpassed by countries that were well behind the frontrunners in 1990.
However, the pattern for textile imports differs from clothing imports in two ways.
First, while China has risen to the top supplier of U.S. textile imports, it is not

dominating the market like it is for clothing. Second, the other top textile suppliers
are not experiencing absolute declines in their sales to the United States, as has been
the case with clothing.
Table 8 lists the top five suppliers of textile imports for the United States from
1990 to 2006. From 1993 to 2005, Canada was the leading source of textile imports
for the United States. It was superceded in 2006 by China, which had moved up
from being the fifth largest textile supplier in 1990 and second in 2003. By contrast,
Japan slid from being the leading source of textile imports in 1990 to fourth in 1995
and disappeared from the top five in 1996. India, which was not among the top five
sources from 1990 to 2001, replaced Italy for fifth in 2002 and moved into third place
in 2006.
Table 8. Top 5 Textile Suppliers for the United States,
1990-2006
(Market Share in Parentheses)
FirstSecond ThirdFourthFifth
1990JapanItaly CanadaSouth KoreaChina
(10.6%) (8.5%) (8.2%) (7.7%) (6.3%)
1991JapanCanadaSouth KoreaItaly China
(10.4%) (8.8%) (8.4%) (8.1%) (6.5%)
1992Japan CanadaSouth KoreaItaly China
(9.7%) (9.6%) (7.7%) (7.3%) (7.1%)
1993CanadaJapan South KoreaChina Italy
(10.2%) (9.1%) (8.2%) (7.0%) (6.7%)
1994CanadaJapan South KoreaItaly Taiwan
(11.8%) (8.6%) (7.8%) (7.7%) (6.1%)
1995CanadaSouth KoreaItaly Japan China
(12.9%) (8.1%) (7.4%) (6.9%) (6.1%)
1996CanadaSouth KoreaItaly MexicoTaiwan
(14.5%) (8.3%) (7.2%) (7.2%) (6.3%)
1997CanadaSouth KoreaMexico China Italy
(14.7%) (8.6%) (7.6%) (6.9%) (6.8%)
1998CanadaSouth KoreaMexico Italy China
(15.5%) (8.3%) (7.3%) (6.4%) (6.2%)
1999CanadaSouth KoreaMexico China Taiwan
(16.2%) (8.3%) (8.0%) (6.5%) (6.0%)
2000CanadaMexico South KoreaChina Italy
(15.9%) (8.5%) (8.4%) (6.6%) (6.0%)
2001CanadaMexico South KoreaChina Italy
(17.0%) (8.8%) (8.6%) (6.3%) (5.9%)
2002CanadaMexico South KoreaChina India
(16.0%) (8.9%) (8.6%) (7.8%) (6.0%)

2003CanadaChina South KoreaMexico India

FirstSecond ThirdFourthFifth
(15.9%) ( 9.0%) ( 8.3%) ( 8.2%) ( 6.5%)
2004CanadaChina Mexico South KoreaIndia
(15.1%) (9.7%) (8.0%) (8.0%) (6.8%)
2005CanadaChina Mexico South KoreaIndia
(14.4%) (13.1%) (8.0%) (7.9%) (7.1%)
2006ChinaCanadaIndia South KoreaMexico
(14.9%) (13.6%) (8.0%) (7.6%) (7.4%)
^So^urce^{: U.S. Dep}^a^r^t^m^eⁿ^t^o^f^Co^m^m^e^r^{ce, Of}^fⁱ^{ce o}^f^T^e^x^{tile an}^d^A^p^p^a^r^e^{l (}^O^T^E^XA⁾
Figure 1. Indices of U.S. Clothing and Textile Imports by Quota
Phase Out, 1995-2006
(Base Year = 1995)

²
^1.⁷⁵
^1.⁵
^1.²⁵
¹
^0.⁷⁵^P^h^a^s^{e T}^w^o^P^h^as^{e T}^h^r^e^e^P^h^as^{e F}^o^ur
^Qu^ot^a^s^Eⁿ^d^Quo^t^as^Eⁿ^d^Qu^ot^as^Eⁿ^d
^0.⁵
^C^hⁱⁿ^a^J^oⁱⁿ^s
^0.²⁵^WT^O
⁰
¹⁹⁹⁵¹⁹⁹⁶¹⁹⁹⁷¹⁹⁹⁸¹⁹⁹⁹²⁰⁰⁰²⁰⁰¹²⁰⁰²²⁰⁰³²⁰⁰⁴²⁰⁰⁵²⁰⁰⁶
^P^h^as^{e 2}ⁱ^t^em^s^P^h^as^e^{3 i}^t^e^m^s^P^h^as^e^{4 i}^t^e^m^s
Despite the gains of China and India, and the losses of Japan, other contenders
— Italy, Mexico, and South Korea — shifted between second and fifth place among
U.S. textile suppliers, largely maintained their share of the overall market. Italy,
which remained among the top five sources for U.S. textile imports until 2001, still
held a market share of 4.9% in 2006. Meanwhile, South Korea’s textile market share
went from 7.75 in 1990 to 8.65 in 2001 and 2002, to 7.6% in 2006. Similarly,
Mexico’s market share rose from 7.2% in 1996 to 8.9% in 2002, and declined to

7.4% in 2006.

Although there has been a rearrangement of the order of the top five textile
suppliers for the United States over the last 10 years, unlike the case for clothing,
China has not pulled away from the other countries. The value of China’s textile
shipments has risen rapidly since 2001, but was only $177 million more than textiles
imported from Canada in 2006. Canada’s textile exports to the United States

experienced some fluctuations during the last 10 years, but were still $324 million
higher in 2006 than in 1997. Similarly, textile imports from South Korea and
Mexico rose $250 million and $224 million respectively between 1997 and 2006.
Impact of the Quota Phase Out. As previously stated, the elimination of
clothing and textile quotas was done in four phases, starting in 1995 and ending in
2005. Each party to the ATC, including the United States, was to specify when its
existing quotas would be eliminated. If the existing quotas were constraining
imports, their removal should cause a subsequent increase in imports. U.S. trade data
for phases 2, 3, and 4 of the ATC quota removal reveals a more complicated pattern
(see Figure 1).¹¹
Figure 1 presents indices of U.S. clothing and textile imports separated into
three groups according to when their quota was eliminated. For goods included in
phase 2, there was no apparent increase in the growth of imports following the
elimination of their quotas on January 1, 1998. Similarly, products included in phase
3 did not jump sharply after the elimination of their quotas on January 1, 2002. Items
included in phase 4 did show a modest growth spurt in 2005, but then sharply
declined in 2006. In general, Figure 1 seemingly does not support the idea that the
elimination of the quotas was the primary factor leading to significantly increased
U.S. clothing and textile imports. However, there were several mitigating factors that
complicate the analysis.
^Source:^{U.S. Dep}^a^r^t^m^eⁿ^t^o^f^Co^m^m^e^r^{ce, Of}^fⁱ^{ce o}^f^T^e^x^{tile an}^d^A^p^p^a^r^e^{l (}^O^T^E^XA⁾
The first mitigating factor is China’s accession to the WTO in December 2001.
As part of becoming a WTO member, China was granted “normal trade relations”
(NTR) status by the United States, which liberalized U.S. import policies towards
Chinese goods in general. Independent of the ATC quota removals, China’s NTR
status may have caused an increase in Chinese imports, including clothing and textile
imports.
A second mitigating factor was the economic impact of the attacks of September
11, 2001, on U.S. imports. Year-on-year U.S. merchandise imports in 2001 declined
by $11 billion in October, $15 billion in November, and $17 billion December.
Monthly import volumes did not post a year-on-year increase until April 2002 and¹²
did not surpass monthly 2000 levels until December 2002.
A third mitigating factor, which will be discussed below, was the imposition of
U.S. safeguard measures on selected Chinese clothing and textile imports before and
after phase 4 of the ATC quota elimination. These safeguard measures, ostensibly
imposed to protect the United States from “market disruptions,” may have

¹¹ Data for phase 1 of the ATC quota removal was unavailable in time for this report.
¹² Data from website of U.S. International Trade Commission.

constrained Chinese imports and thereby obscured the effects of quota removals on
clothing and textile trade flows.
Interpreting U.S. Trade Data. Overall, there are six trends in the U.S. trade
data that are of particular note. First, U.S. clothing imports grew faster than textile
imports over the last 10 years. Second, the growth in clothing imports accelerated
starting in 2003. Third, the year-on-year increase in clothing and textile imports
between 2004 and 2005 was not significantly greater than the years before and after.
Fourth, for both clothing and textile imports, China and India rose among the leading
suppliers. Fifth, the rise of China and India as sources of clothing and textile imports
has not meant a major decline in imports from other leading suppliers. Instead, the
other major sources of clothing and textile imports have by and large maintained the
value of their exports to the United States, but have lost market share due to the
increase in U.S. clothing imports. Sixth, U.S. import data, when sorted by the phased
elimination of quotas, does not show significant surges in imports following the
termination of quotas for two of the three phases considered.
Post-ATC Clothing and Textile Exports: The View from China
According to official U.S. trade statistics, China began its rise to become the top
supplier of clothing and textiles for its top trading partner with the start of the new
millennium. It appears that the combined effects of China’s accession to the WTO
in December 2001 and the phased termination of the ATC removed trade barriers that
had previously prevented China from exporting more clothing and textiles to the
United States.
However, for various reasons, official U.S. trade statistics and official Chinese¹³
trade statistics differ — and on occasion, differ quite dramatically. An examination
of China’s official statistics can determine if they also see a similar rapid rise in
clothing and textile trade with the United States. Also, by analyzing China’s clothing
and textiles exports in general, it is possible to determine if the recent increase in
exports is unique to China’s trade with the United States, or a more general
phenomena.
China’s Clothing Exports to the United States and the World. Figure
2 provides a look at China’s clothing exports to the United States over the last 10
years from China’s perspective. For each year, total clothing exports are divided into
its three HS chapters — knitted apparel (HS61), woven apparel (HS62) and¹⁴
miscellaneous articles made with textiles (HS63).
In general, China’s clothing export data is similar in scale and trend to U.S. data.
There are a few minor differences, however. The United States reports about $2
billion more in clothing imports from China from 1997 to 2004, with the gap
narrowing in 2005 and 2006. Also, the Chinese data shows a rather dramatic spike

¹³ For more information on the differences between U.S. and Chinese trade statistics, see
CRS Report RS22640, What’s the Difference? — Comparing U.S. and China Trade Data,
by Michael F. Martin.
¹⁴ HS63 includes such items as bed linens, blankets, curtains, tarpaulins, and worn clothing.

in clothing exports in 2005, the first year after the termination of the ATC, while the
U.S. data has smoother increase in Chinese clothing imports from 2003 to 2006.
While these differences may seem minor, they may have political implications that
will be discussed later in this report.
Figure 2. China’s Clothing Exports to the United States, 1997-2006
(U.S. $ Millions)

20,000
15,000
10,000
5,000
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Knit Apparel (HS61)Woven Apparel (HS62)
Miscellaneous Articles (HS63)
^Source:^Glo^b^a^{l T}^r^ad^{e A}^tlas
Having established that the Chinese data also reveal a recent jump in clothing
exports to the United States, it is important to determine if this is a unique
phenomena with the United States or if China’s clothing exports are on the rise in
general. Figure 3 compares the rise in China’s clothing exports to the United States
to its total clothing exports.
The graph reveals two key characteristics of the relationship between China’s
clothing exports to the United States and its clothing exports to the world. First, the
United States captures a small, but growing portion of China’s clothing exports. In
1997, the United States received 9.8% of China’s clothing exports; in 2006, it
represented 18.0% of its clothing export market. Second, China’s total clothing
exports have risen rather steadily since 2002, but its exports to the United States have
grown in a more uneven fashion. Clothing exports to the United States grew by 27%
in 2004, 83% in 2005, and 21% in 2006.

Figure 3. China’s Clothing Exports: United States vs. World, 1997-2006
(U.S. $ Billions)
120
100
80
60
40
20
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
WorldUnited States
^Source:^Glo^b^a^{l T}^r^ad^{e A}^tlas
China’s Textile Exports to the United States and the World. China’s
textile exports are worth less than half of its clothing exports, but still contributed
over $37 billion to China’s exports in 2006. As shown in Figure 4, China’s textile
exports began a rather steady increase in value starting in 2001, rising more than $23
billion over five years after several years of little growth.
Figure 4. China’s Textile Exports: United States and the World,
1997-2006
(U.S. $ Billions)

40
35
30
25
20
15
10
5
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
WorldU.S.
^Source:^Glo^b^a^{l T}^r^ad^{e A}^tlas

The increase in China’s textile exports to the United States also started in 2001,
but accelerated in 2005. From 1997 to 2001, textile exports to the United States were
nearly stagnant, resulting in a decline in the portion of China’s textiles shipped to the
United States from 4.2% to 3.7%. From 2001 to 2004, exports to the United States
grew, but at a slower rate than total textile exports. Then, in 2005, textile exports to
the United States nearly doubled in value from the year before, raising the U.S.
market share from 3.2% to 5.3% of China’s total textile exports. In 2006, textile
exports to the United States increased by about $100 million, and its market share
declined to 4.7%.
Comparing U.S. and Chinese Data
China’s clothing and textile trade data provides a picture of Sino-U.S. trade
flows that is generally consistent with U.S. trade data. Both countries report rapid
growth in clothing and textile trade over the last 10 years, with notable increases
following the termination of the ATC. China and the United States have China’s
clothing and textile exports making a quantum jump in 2005, with a subsequent
growth slowdown in 2006.
However, both countries also reveal that the growth in China’s clothing and
textiles exports predates the termination of the ATC. For both clothing and textiles,
there is a notable stepping up of trade levels between 2001 and 2002, with the higher
growth rate continuing until 2004. Plus, following the apparent one time jump in
2005, the year-on-year increase in U.S. clothing and textile imports from China in

2006 declined to $3.6 billion, similar to annual increases from 1991 to 1995.

The data from the two nations also reveal differences between clothing and
textile trade. Whereas China has become an increasingly important source of U.S.
clothing and textile imports, China is the clear market leader for clothing, but faces
continued competition from Canada in the textile market. From the Chinese
perspective, the U.S. market increased in importance over the last 10 years, but in the
textile market, the United States remains a comparatively small — and possibly
declining — outlet for China’s textile exports.
One possible interpretation of the trade data is that the United States is more
dependent on importing clothing and textiles from China than China is dependent on
exporting its clothing and textiles to the United States. According to the data, this
possible reliance may be more pronounced for clothing than for textiles. If true, this
may have implications for the effectiveness of U.S. pressure on China to redress the
growing bilateral trade imbalance by imposing trade remedies on China’s clothing
and textiles exports.
Impact on U.S. Clothing and Textile Industry
Besides the potential effect on the U.S. international trade balance, any increase
in clothing and textiles imports brought about by the termination of the ATC could
have an impact on the U.S. clothing and textile industry. Faced with an increase in
the import of clothing and textile products, some U.S. manufacturers may no longer

be as competitive as before and cut back or cease operations and dismiss some or all
of their workers. While it is relatively early, statistics for the U.S. clothing and
textile industry provide mixed evidence on the impact of the ATC quota elimination
on domestic clothing and textile manufacturing and employment.
Domestic Production Trends. Figure 5 shows the gross value of U.S.
clothing and textile production employment by U.S. clothing and textile
manufacturers from 1990 to 2005. The value of clothing and textile production rose
between 1990 and 1997, but employment declined. Starting in 1998, both production
and employment for both U.S. clothing and textile manufacturers began to decline.
Figure 5. U.S. Clothing and Textile Production and Employment,

1990-2005

1001200
90
801000thous
70800
na
60onds
50 Billi600 o
40US$f jobs
30400
quota
20200removals
10
00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Gross Output: ClothingGross Output: Textiles
Employment: ClothingEmployment: Textile
^Source:^U^.^S^.^Bu^reau^of^Econ^omⁱ^c^Aⁿ^al^y^sⁱ^s^{, U}^.^S^.^D^e^part^m^eⁿ^t^of^L^a^bor
Although the recent decreases in domestic clothing and textile production and
employment is largely concurrent with the removal of ATC quotas, the timing and
pace of these decreases raises some doubts about the significance of apparent
correlation. Domestic clothing production was largely unchanged after the phase 1
quotas were eliminated and the value of textile output actually increased. Also, the
largest year-on-year reduction in textile production and the second largest declines
in clothing production occurred in 2001 — not a year in which quotas were lifted.
Plus, while the value of U.S. clothing production has continued its sharp decline
since 2001, textile production has nearly leveled off.
Domestic clothing and textile labor trends also pose problems in analyzing the
impact of the quota removal, but for different reasons. There was a notable
downward trend in domestic clothing and textile employment even before the ATC

took effect. For clothing manufacturers, the peak period for job losses was from
1995 to 2003, which is concurrent with the first three phases of the ATC quota
removals, but since then job losses have slowed, even after the fourth and largest
quota removal in 2005. For the textile industry, the pace of staff reductions began
to pick up after the second quota removal in 1998, implying that the first quota
removal had little impact on the industry’s employment situation.
While the concurrent decline in the production and employment of the U.S.
clothing and textile industry with the rise in clothing and textile imports during the
phasing out of the quotas may be interpreted as evidence of an adverse impact on
U.S. manufacturers, statistical analysis raises some doubt about such an
interpretation. Because there was a preexisting secular decline in the U.S. industry,
the staged removal of quotas might or might not have been a contributing factor in
the actual production decline from 1998 to 2005. Econometric models examining the
relationship between domestic production and imports of clothing and textiles
provided mixed results.¹⁵
Anecdotal Evidence. While the international trade data and domestic
industry data provide rather ambiguous results on the possible impact of quota
elimination on the U.S. clothing and textile industry, there is a fairly extensive pool
of anecdotal evidence that the recent increase in clothing and textile imports have had
a deleterious effect on U.S. manufacturers. In a April 2005 report on textile safeguard
procedures, the Government Accountability Office (GAO) pointed to secular
increases in monthly brassiere and sock imports from China as evidence of the¹⁶
domestic “market disruption” caused by the removal of quotas. However, in
neither case did the GAO report provide direct evidence that the sharp increase in
imports resulted in a drop in U.S. brassiere or sock production or employment.
U.S. clothing and textile manufacturers and their representatives often cite
spikes in the import of certain products — frequently, imports from China — as
evidence to establish that the removal of quotas has harmed the domestic industry.
For example, a June 2003 press release by a coalition of U.S. clothing and textile
manufacturers juxtaposed a supposed 140% surge in Chinese clothing and textiles
exports between March 2002 and March 2003 with the closure of more than 50 U.S.
clothing and textile factories over the same time period, implying a connection
between the two events.¹⁷ Similarly, in a July letter to the President, the same

¹⁵ Econometric models constructed by the author of clothing and textile imports did not
consistently support the hypothesis that the removal of quotas were significantly positively
correlated with imports, nor did the models consistently support the hypothesis that clothing
and textile imports were significantly negatively correlated with U.S. clothing and textile
production.
¹⁶ U.S. GAO, “U.S.-China Trade: Textile Safeguard Procedures Should Be Improved,” April

2005, GAO-05-296.

¹⁷ “United Textile Industry Demands Action on China Trade Policy,” joint press release
issued American Textile Manufacturers Institute, American Yarn Spinners Association,
National Cotton Council of America, National Textile Association, American
Manufacturing Trade Action Coalition, and the American Fiber Manufacturers Association,
(continued...)

coalition claimed that Chinese imports of “decontrolled” categories of clothing and
textiles had increased 400% in 15 months, and as a result, China “already has
captured 40% of the U.S. market in those decontrolled categories and is projected to
take between 65% and 75% by the end of the year.”¹⁸ The next sentence then
connects the rise in Chinese imports to the domestic industry, saying “To avoid
further devastating plant closings and job losses, the U.S. government must move
immediately to self-initiate the special Chinese textile safeguard on sensitive textile
and apparel categories....”¹⁹ As will be explained below, the United States had
already started this process before this letter arrived at the White House.
Increased competition from China need not necessarily take the form of
increased imports; it can also come in the form of price competition for some
products. For example, although the overall import price indices for clothing and
textiles increased during the phasing out of the ATC quotas, the import price index
for made up or worn textile items decreased from 104.9 in January 1995 to 94.5 in
January 2007.²⁰ Even without an increase in the quantity of imports, U.S.
manufacturers may be pressured to reduce production costs and eliminate jobs due
to decreases in the market prices of their products caused by lower import prices.
Imposition of U.S. “Safeguards”
The sharp rise in clothing and textile imports from China after 2001 led to the
United States invoking a safeguard provision included in China’s WTO accession
agreement.²¹ According to the accession agreement, the United States may impose
import quotas of textiles and clothing from China if the increase in the value of
shipments from China causes “market disruption” in the United States. The terms
of the agreement allow the United States to act unilaterally for one year, after which
it must consult with the China in order to continue the quotas. This special safeguard
provision for Chinese clothing and textile imports expires on December 31, 2008.
The legal authority to regulate the import of clothing and textiles is provided for
in section 204 of the Agriculture Act of 1956, as amended (7 U.S.C. § 1854). The
administration of safeguard measures was delegated to the Committee for the
Implementation of Textile Agreements (CITA) by Presidential Executive Order

11651, as amended (37 F.R. 4699). CITA set forth its procedures for considering

¹⁷ (...continued)
by June 11, 2003.
¹⁸ Joint letter to President from the American Textile Manufacturers Institute, American
Yarn Spinners Association, National Cotton Council of America, National Textile
Association, American Manufacturing Trade Action Coalition, and the American Fiber
Manufacturers Association, released on July 7, 2003.
¹⁹ Ibid.
²⁰ Data from the U.S. Bureau of Labor Statistics [http://www.bls.gov].
²¹ For a more detailed description of the safeguard measures available to the United States
on clothing and textiles from China, see CRS Report RL32168, Safeguards on Textile and
Apparel Imports from China, by Vivian C. Jones.

safeguard requests for Chinese clothing and textile imports in the Federal Register
on May 19, 2003.²²
Twice in 2003, and again in 2004, coalitions of U.S. clothing and textile
manufacturers petitioned the CITA requesting the imposition of quotas on the import
of selected Chinese clothing and textile products, arguing that a rapid increase in
imports had led to the required “market disruption.” In all three cases, the CITA
found on behalf of the petitioners and imposed quotas. Quotas were set for 10
separate clothing and textile categories in 2005 (see Table 9).
Table 9. Chinese Quota Utilization Rate, 2005
CategoryQuotaDateQuota LimitAmount ofQuota UsedUtilizationRate
Combed cotton yarn (301)5/26/051,450,777 kg1,044,126 kg72.0%
Hosiery (332/432/632)11/04/0510,298,023 dpr10,298,023 dpr100.0%
Cotton knitted shirts &5/20/054,704,1154,704,115100.0%
blouses (338/339)dozendozen
Men’s & boys’ woven5/26/052,213,1262,213,126100.0%
shirts (340/640)dozendozen
Cotton trousers (347/348)5/20/054,340,6384,340,638100.0%
dozendozen
Brassieres & support9/1/057,275,2165,203,15671.5%
garments (349/649)dozendozen
Underwear (352/652)5/20/055,062,8925,062,892100.0%
dozendozen
Other synthetic filament9/1/0512,328,306 m²12,328,306 m² 100.0%
fabric (620)
Man-made fiber knitted5/26/052,844,3832,844,383100.0%
shirts & blouses (638/639)dozendozen
Man-made fiber trousers,5/26/052,660,6782,660,678100.0%
breeches, & shortsdozendozen
(647/648)
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^No^te:^k^g^-^kⁱ^l^o^g^r^am^s^;^{dpr -}^dozen^pai^r^;^m^{- sq}^ua^r^e^m^e^t^e^r^s
The 100% utilization of 8 of the 10 quotas was generally seen as support for the
idea that safeguards were preventing a more rapid increase in Chinese imports.
However, the safeguards also forestalled the full effect of the termination of the ATC.

²² 68 F.R. 27787.

Some observers were concerned that there would be a second “surge” in Chinese
clothing and textile exports to the United States after these safeguards were removed.
Based in part on this fear of a “second surge,” in October and November 2004,
even before the ATC quotas were lifted, another coalition of U.S. clothing
manufacturers and labor unions petitioned the CITA arguing that the anticipated
increase in Chinese imports would cause a market disruption and that the CITA
should impose preemptive quotas on certain clothing and textile products. In a move
that surprised some observers, the CITA agreed to consider the so-called “threat-
based” petitions.
While CITA was considering the various petitions, China and the United States
began negotiations on the possibility of restricting the rate of increase of clothing and
textile exports to the United States. On November 6, 2005, China and the United
States signed the “Memorandum of Understanding Between the Governments of the
United States of America and the People’s Republic of China Concerning Trade in
Textile and Apparel Products,” or the “U.S.-China MOU.”
The U.S.-China MOU covers most, but not all, categories of clothing and
textiles for the years 2006, 2007, and 2008. For clothing, the rate of increase of
imports was set at 10% in 2006, 12.5% in 2007, and 15% in 2008. For textiles, the
annual allowable rate of increase was set at 12.5% in 2006 and 2007, and 15% in
2008. The enforcement of the safeguards was to be done cooperatively, using an
electronic visa information system (ELVIS). Following the announcement of the
signing of the U.S.-China MOU, CITA terminated its consideration of the pending
petitions.
Administrative oversight of the U.S.-China MOU is handled by U.S. Customs
and Border Protection in the United States, and the Ministry of Commerce in China.
Under China’s provisional “Measures for Administration on Textile Export,” export
visas are allocated among Chinese exporters via an electronic bidding process. As
a result, Chinese exporters must pay for the opportunity to export restricted clothing
and textiles to the United States.
In 2006, none of the 22 separate quotas established in the MOU were fully
utilized, according to U.S. Customs and Border Protection (see Table 10). Only four
categories were more than 80% utilized and one — category 666, that includes bed
linens, table linens, and curtains — used less than 4% of its quotas.
Table 10. Chinese Quota Utilization Rates, 2006
CategoryQuota Limit Amount ofQuota UsedUtilization Rate
Sewing thread & combed cotton7,529,582 kg2,908,267 kg38.6%
thread (200/301)
Knit fabric (222)15,966,487 kg8,793,627 kg55.1%
Special purpose fabric (229)33,162,019 kg10,287,255 kg31.0%

CategoryQuota Limit Amount ofQuota UsedUtilization Rate
Hosiery (332/432/632-T)64,386,841 dpr52,248,897dpr81.1%
Hosiery (332/432/632-B)61,146,461 dpr50,379,835 dpr82.4%
Cotton knitted shirts & blouses20,822,11117,312,79283.1%
(338/339) dozen dozen
Men’s & boys’ woven shirts6,743,644 dozen4,448,302 dozen66.0%
(340/640)
Cotton trousers (347/348)19,666,04916,957,81086.2%
dozendozen
Brassieres & support garments22,785,90617,092,07675.0%
(349/649) dozen dozen
Underwear (352/652)18,948,93713,559,34771.6%
dozendozen
Swimwear (359-S/659-S)4,590,626 kg3,008,608 kg65.5%
Cotton terry towels (363)103,316,87365,595,88063.5%
piecespieces
Men’s & boys’ wool suits (443)1,346,082 pieces944,964 pieces70.2%
Men’s & boys’ wool trousers215,004 dozen125,961 dozen58.6%
(447)
Polyester filament fabric (619)55,308,506 m²16,373,057 m²29.6%
Other synthetic filament fabric80,197,248 m²12,683,295 m²15.8%
(620)
Glass fabric (622)32,265,013 m²13,240,038 m²41.0%
Man-made fiber knitted shirts &9,060,063 dozen6,511,836 dozen80.8%
blouses (638/639)
Sweaters (345/645/646)8,179,211 dozen4,967,242 dozen60.7%
Man-made fiber trousers,7,960,355 dozen6,360,986 dozen79.9%
breeches, & shorts (647/648)
Window blinds/window shades964,014 kg36,584 kg3.8%
(666)
Silk blend & non-cotton17,647,25512,845,24372.8%
vegetable fibre trousers (847)dozendozen
^So^urce^:^U^.^S^.^C^u^s^t^om^s^an^{d Border Prot}^ectⁱ^oⁿ²
^No^te:^k^g^-^kⁱ^l^o^g^r^am^s^;^{dpr -}^dozen^pai^r^;^m^{- sq}^ua^r^e^m^e^t^e^r^s
The under-utilization of the 2006 safeguard quotas raises questions about the
impact of the protective measure. Some analysts have interpreted the excess quota

as evidence that the fear of a “second surge” was misplaced, and that the market
adjustments to the termination of the ATC took place in 2005. Others, however,
believe that U.S. importers became very risk adverse in 2006, and intentionally
avoiding purchasing constrained products from Chinese suppliers in 2006.
Interpreting Pre- and Post-ATC Trade
In general, the trade data confirm many of the predictions by the market analysts
prior to the termination of the ATC quotas. Global clothing and textile trade is
growing more rapidly after 2005 than it did before 2005 and China is a major
beneficiary of the greater growth. China secured nearly three-quarters of the year-on-
year increase in clothing trade between 2004 and 2005, and its increase in textiles
exports between 2004 and 2005 was slightly greater than the total rise on global
textiles trade. Plus, as predicted, the United States is importing more of its clothing
and textiles from China.
However, when examined more closely, there are patterns in the trade data that
either were not anticipated or are not consistent with some of the analysts’
predictions. For example, while there has been the expected market growth, both in
the global and U.S. market, the foreseen major shifts in production have not
occurred. Instead, the data suggests that most nations were able to maintain the value
of their clothing and textiles exports after the termination of the ATC quotas,
possibly indicating that the preferential trade programs were helping some nations’
clothing and textile trade. However, most countries were unable to significantly
increase their exports, while China — and to a lesser extent, India — were able to
expand their exports. In other words, China was able to increase its share of the
global and U.S. clothing and textile markets by capturing most of the market growth.
Also, the “surge” in Chinese clothing and textile exports in 2005 was smaller
than many analysts suggested it would be. For example, China’s shares of the U.S.
clothing and textile markets in 2006 — 29.1% for clothing and 14.9% for textiles —
is well below the levels projected by the ATMI study. This in part may be due to the
imposition of safeguard measures in 2005 and 2006. However, the under utilization
of the U.S.-China MOU quotas in 2006 may indicate that much of the increase in
Chinese clothing and textile exports has passed.
Similarly, U.S. clothing and trade data and industry figures for the U.S. clothing
and textile industry present a mixed picture of the impact of the end of the ATC
quotas on U.S. clothing and textile production and employment. The value of U.S.
clothing textile production rose during the initial stages of the ATC quota phase out,
with the major declines starting after China’s WTO accession. By contrast,
employment for both the clothing and textile industry declined steadily from 1990 to
2005, but not necessarily concurrently with the elimination of quotas. As previously
discussed, the U.S. utilization of safeguard measures may have mitigated some of the
negative impact of the termination of the ATC quotas. However, the fact that the
2006 quotas were not fully used would seem to indicate that the safeguards are not
necessarily preventing Chinese imports from sub-planting U.S. manufacturers and
workers.

An unanticipated — and perhaps, unpredictable — trend in the U.S. trade data
was the substantial rise in clothing and textile imports starting prior to the end of the
ATC quotas. In the clothing market, U.S. total imports jumped by $5.8 billion in
2003, touching off a four-year run of rapid increases. In the textile market, the big
increase in total imports occurred in 2004 — not in 2005 or 2006. Besides the
possible effects of the safeguard measures, another possible explanation for the pre-
ATC termination growth was China’s accession to the WTO in December 2001.
One final prediction that proved to be comparatively accurate was the use of
trade remedies by the United States. Yet, there are two aspects of the use of trade
remedies that the analysts did not foretell. First, the “pre-emptive” petitioning of the
CITA for safeguard measures prior to January 1, 2005 was unprecedented. Second,
following the announced preliminary countervailing duty decision by the U.S.
Department of Commerce on Chinese coated paper, there are reports that a coalition
of U.S. clothing and textile companies is consulting with lawyers about initiating a
claim against Chinese clothing and textile imports.²³
Implications for Congress
The termination of ATC quotas in 2005 and the ensuing growth of clothing and
textile imports, regardless of any causal relationship between the two events, have
added clothing and textile trade to growing list of bilateral trade issues between the
United States and China. To a limited degree, the accelerated growth in Chinese
clothing and textiles exports to the United States over the last few years has²⁴
contributed to mounting U.S. bilateral trade deficit.
One of the unanswered questions raised by the imposition of quotas under the
U.S.-China MOU is if there will be a “surge” in Chinese imports if the quotas lapse
at the end of 2008. If there is such a surge, it is also uncertain if U.S. manufacturers
will choose to respond by petitioning the CITA for the imposition of safeguard
measures under the general safeguard mechanism (available until 2013) or pursue the
matter with the U.S. International Trade Commission by requesting countervailing
duties.
In either case, current trends in the U.S. clothing and textile markets dovetail
with several legal issues that Congress may choose to address. Several bills have
already been introduced — H.R. 708, H.R. 1229, and S. 974 — that address the
application of countervailing duties to non-market economies, such as China.²⁵ Other
legislation — H.R. 321, H.R. 782, H.R. 1002, S. 364, and S. 796 — seek to reduce

²³ “Chinese Textile Exporters to Face New US Probe,” The Hindu, May 16, 2007.
²⁴ For more information on the rising bilateral U.S. trade deficit with China, see CRS Report
RS22640, What’s the Difference? — Comparing U.S. and Chinese Trade Data, by Michael
Martin, and CRS Report RL33536, China-U.S. Trade Relations, by Wayne M. Morrison.
²⁵ For more information on China and countervailing duties, see CRS Report RL33536,
China-U.S. Trade Relations, by Wayne M. Morrison.

the rise in Chinese imports by addressing China’s alleged policy of intentionally
undervaluing its currency.”²⁶
In addition, the continued decline in clothing and textile employment in the
United States raises the possibility that U.S. clothing and textile manufacturers and
workers may seek trade adjustment assistance.²⁷ On March 28, 2007, the Trade
Adjustment Assistance Reform Act of 2007 (H.R. 1729) was introduced, seeking to
amend the Trade Act of 1974 to provide greater eligibility for clothing and textile
workers for assistance, as well as to increase federal funding for the assistance
program.
Finally, the apparent ability of most nations to preserve their clothing and textile
export volumes to the United States despite the rise in Chinese goods may signal that
the various trade promotion programs are proving beneficial. Programs such as GSP,
the Andean Trade Preference Act, and the Carribean Basin Initiative may protect and
promote the development of competitive industries in less industrialized nations.
Similarly, free trade agreements — such as the North American Free Trade
Agreement — may help provide the edge clothing and textile manufacturers in
beneficiary countries need to compete against Chinese suppliers. With several of
these trade preference programs coming up for renewal — and a number of free trade
agreements possibly coming up for ratification — Congress may wish to consider the
case of the clothing and textile industry in the post-ATC era as part of their
deliberations.

²⁶ For more information on the alleged undervaluation of China’s currency, see CRS Report
RL32165, China’s Currency: Economic Issues and Options for U.S. Trade Policy, by
Wayne M. Morrison and Marc Labonte.
²⁷ For more information about trade adjustment assistance, see CRS Report RS20210, Trade
Adjustment Assistance for Firms: Economic, Program, and Policy Issues, by J. F.
Hornbeck.