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John Kohut

CHINESE and US negotiators yesterday opened make-or-break talks in Beijing to try to solve their dispute over textile exports which Washington has threatened to cut by up to a third, threatening a trade war.

  The talks opened in an atmosphere of secrecy, with even the press office of China's Ministry of Foreign Trade and Economic Development saying it had no details.

  The first session got under way at about 10 am and negotiations are scheduled to wind up tomorrow, although the possibility of going on till Tuesday has been left open, a US embassy official said.

  The US negotiating team is headed by Ambassador Jennifer Hillman, the deputy US trade representative, who arrived in Beijing on Thursday.

     At the heart of the dispute is Washington's contention that China has been illegally exceeding its textiles quota by transshipping goods to third countries and putting on new labels.

   Washington announced earlier this month it would cut the quota for Chinese textiles by up to 35 per cent on more than 80 categories of goods, from sweaters to machinery cleaning cloths, a move which could cut the value of China's exports by up to US$1.2billion (HK$9.3 billion) and put 300,000 mainland workers out of work.

  The order came after the December 31 expiry of the US import quota agreement and is due to come into effect tomorrow.

  US trade representative Mickey Kantor has vowed to implement the sanctions unless the issue is resolved by the deadline, whether or not the talks are still in progress.

  But China, calling Washington's decision irresponsible, has threatened unspecified retaliation if the US enforces the quota cut.

  Chinese-made cotton textile exports to the US will be hardest hit under the US textile quota cut.

  The US will reduce China's quota by 25 per cent in 73 categories and by 35 per cent in eight categories, according to the United States Trade Representative (USTR).

  The eight categories are cotton knit shirts, cotton sweaters, cotton trousers, cotton underwear, cotton towels, synthetic sweaters, woollen sweaters and sweaters of non-cotton vegetable fibre.

  Hong Kong, as a major re-exporter of Chinese-made goods to the US, is likely to be hit as well under the quota penalty.

  Last year, Hong Kong re-exported textile products worth HK$23.58 billion from China to the US.

  Many Hong Kong textile traders are involved in shipping cotton coats, sweaters, underwear, trousers, nightwear and synthetic coats and suits.

  A US customs official said: ''If the talks break off tomorrow, as it probably will, China will go to the Geneva-based Textile Surveillance Body to appeal against US action.''   Signed in 1988, the Sino-US textile agreement expired at the end of last year. Both countries have held three meetings since July 9 to try to agree for a renewal.

  But the negotiations broke off because, a Chinese negotiator claimed, the US wanted to include a new rule, known as the anti-circumvention clause, which would grant the US a right to impose unilateral trade sanctions against China.

  The mainland refused to allow the rule and the US announced to the quota cut.

  According to a report by the National Apparel and Textile Association (NATA), the largest US textile organisation, the value of illegal trans-shipments is US$2 billion a year and that over-shipments in 1993 occurred in 56 per cent of China's quota categories.

  Those quota cuts will reduce Chinese textile exports from US$4.7 billion in 1993 to an estimated US$3.5 billion.

  Guangdong Textile Import and Export Corporation predicted that US sanctions would cost 300,000 jobs in China.

  NATA's report says: ''The US appears to be determined to impose these quota cuts, even if China signs a new agreement.

  ''There is, however, the possibility that the quota might be reinstated in the future, as it was with Taiwan and Macau, if China makes progress in controlling transshipments.''   It adds that the US has decided not to allow overshipments (embargoed goods) from China to be released in future years.

  In other words, once a Chinese quota category has been filled, no other goods would be allowed to enter, even in the next quota cut.

  The combined effect of last year's overshipment and the US quota cuts means that these categories will fill much earlier in 1994.

  Cuts in quotas will also drive up product prices around the world and start a scramble for new suppliers.



Make-or-break time for textiles