China showed its willingness to negotiate to avoid a trade war by coming to an agreement with the European Union over the weekend. 

However, the Sino-US dispute over the same issue is still at a position of stalemate.

A trade war between China and the United States will benefit no one, their own people included.

The best way to solve the problem is to ensure genuine free trade and competition in a cooperative spirit.

As the world's biggest textile producer, consumer and exporter, China's textile exports, especially to the US and the EU, surged after textile quotas were lifted at the beginning of this year.

Although this is natural according to the laws of the market economy, the Chinese government, in an attempt to seek an amicable and win-win settlement and avoid trade friction, voluntarily imposed export tariffs on 148 categories of textile products at the beginning of 2005. It also announced on May 20 that it would quintuple export tariffs on 74 textile categories.

These efforts, however, didn't seem to have much impact on US trade officials.

In addition to the one-year curbs on sock imports from China it imposed last October, the US reimposed quotas on seven varieties of textile and clothing products made in China, including trousers, underwear and shirts.

This forced China to abolish export tariffs on 81 lines of textiles from June 1 and revoke its earlier decision to quintuple export taxes on the 74 kinds of products.

The Chinese textile industry, with 19 million employees, is bogged down in the textile dispute and has begun to feel the effect of growing trade protectionism in the US.

The new trade barriers set by the US will lead to heavy, direct economic losses in China, and every item subject to protectionist measures involves between 1,000 and 6,000 Chinese enterprises.

Many Chinese textile manufacturers have had to stop accepting orders and slash production.

Workers in the sector, most of them low-income earners, are suffering under the worsening external trade environment.

The Tianjin No 2 Cotton Mill, a traditional manufacturing base in north China, now has more than 2,000 workers with nothing to do. It worries about the "consequences" if garment makers are eventually badly affected by the trade dispute. With an estimated 20 per cent drop in this year's sales, the factory is considering canceling a plan to raise salaries.

If the welfare of Chinese textile workers is not what the US trade officials care for although human rights are a hot issue in the nation's dialogues with China they should be aware that a trade war brings no good to themselves, either.

Inexpensive Chinese-made children's wear, for example, helped American parents save US$400 million between 1998 and 2003, according to a Morgan Stanley survey.

In fact, for every item of Chinese textile exported to the US, more than 80 percent of the profit goes to US businesses, while Chinese factories and workers have to live on limited earnings.

The US government's restrictions on imports from China, however, will drive up the price of clothing and textiles without really helping American domestic industries.

If asked what is covered by the US$45 a consumer pays in the US for a wool sweater imported from China, one could argue it includes the cost of yarn, dyes and labor, as well as costs related to selling the item of clothing.

What is not commonly known is that the buyer also pays a tidy sum for protectionism -- a tariff and "quota cost" resulting from a government-imposed limit on the number of sweaters the US can import.

In fact, protectionism represents quite a large chunk of the US$45 an American consumer pays for the sweater. Even if the sweater is labeled "Made in the USA," its price is higher because of protectionism.

Aron Schavey, a policy analyst at the US Center for International Trade and Economics, found a few years ago that, because the US government set annual quotas for the number of imported China-made sweaters, the cost of each sweater has been raised by about US$12, increasing the wholesale price by 38 percent.

A Consumer for World Trade (CWT) report says the average US household spends US$1,793 on clothing and accessories each year, while the hidden "Protection Tax" accounts for about US$226. US consumers would save an estimated US$24.4 billion each year if the US government removed textile quotas or limitations.

US Commerce Secretary Carlos Gutierrez argues that the new limit "demonstrates the administration's continued commitment to America's textile manufacturers and their employees."

However, the past several decades have shown that the protectionism of the US textile industry has resulted in an effect contrary to the goals of the US government.

The decision to abolish the quota system on the world's textile trade was made about 10 years ago. The US textile industry has had enough time to prepare itself for the new environment in 2005. However, it seems that it has done very little to train itself to be more competitive in the world textile trade. The only thing it seems prepared to do now as it faces new challenges is to ask for more protection from the government.

Chinese and US officials are due to meet again in the coming weeks to settle the textile trade dispute.

The best way to solve it is possibly as Pam Slater, executive director of CWT, says: "The US government should allow free trade in textiles and apparels with China and other countries, while helping those Americans working in the textile industry find jobs in other, more competitive industries. This is what is in the best long-term interests of Americans."

(China Daily June 15, 2005)