STRIPPED BARE, international trade spats come down to things as banal as underwear. Stripping away the underwear, one finds the real meat of the issue: domestic politics. The row between the US and China over textiles is no exception. Following the expiry of global textile quotas on January 1, first-quarter imports of cotton underwear from China surged 389 per cent over the same period last year. In response, the Bush administration announced this week that it would jumpstart safeguard measures against cotton underwear and five other Chinese garment import categories. The move drew protests from the Ministry of Commerce, but was cheered by US domestic textile manufacturers. Washington will now determine if the suspect imports have caused 'market disruptions'. Offending articles would then be hit with one-year 'safeguard quotas', permitted under World Trade Organisation rules until 2008, capping their import growth to 7.5 per cent. The decision marks the first time the US government has acted on its own, rather than waiting for domestic industries to file petitions. Newly appointed Commerce Secretary Carlos Gutierrez said the goal was 'to ensure that American manufacturers and workers compete on a level playing field'. But new quotas on Chinese underwear miss the mark and are unlikely to result in stronger American industry. In the first three months of this year, the US imported 2.7 billion pieces of cotton underwear. That is nine underwear items for each man, woman and child in the country. Despite quadrupling, imports from China still only accounted for 1.6 per cent of the total. At first glance, it would seem counter-intuitive for the US to risk damaging relations with its third-largest trading partner over such relatively small stakes. But given the Bush administration's international trade agenda, it is precisely because those stakes are small that they are worth risking. From Washington's perspective, relations with its six partners in the Central American Free Trade Agreement (Cafta) - Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua - are of much larger consequence than China in terms of the textiles trade. Cafta has yet to be ratified by the US congress, and domestic opposition is mounting. Last year, these small countries accounted for 55.5 per cent of US cotton underwear imports. In the first quarter of this year, US imports of cotton underwear from Cafta nations rose by less than 10 per cent. But in absolute terms, the spike in imports from the Central American nations was greater than the China 'surge' by 8.4 million items of underwear, or 40 per cent. The 'disruption' from the neighbours to the south is a little more palatable because clothing factories in Cafta nations use a good deal of US-spun fabrics and yarns. In return, they export their finished goods to the states tariff-free. Chinese apparel exports, on the other hand, are made up mainly of domestically sourced materials. The Bush administration has spent the past two years negotiating market access with individual Cafta countries, including the immediate elimination of tariffs on 80 per cent of US exports to the region. It could present the deal to Congress for a vote as early as next month, but first needs to garner enough support to ensure passage. Though Cafta faces opposition from many Democrats, it also sits poorly with Republicans hailing from hard hit manufacturing constituencies in the US textile belt. Their support could prove to be the deciding factor, and though the new tough tack on China will not bring back American jobs, it may be enough to curry favour ahead of the Cafta vote. 'The administration is trying to figure out how to work with textile state [congressmen],' says Timothy Punke, a partner with law firm Preston, Gates and Ellis who specialises in international trade agreements. 'It's going to be a very difficult vote.'
