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Executivesummary1Analysisresults3Chinesepricechanges4Chinesedominance4PerilforMexico,CBIandAfrica62005–HowmuchwillChinatake?7ImpactonU.S.textileandapparelsector10Impactonothercountries11WhyChinaissodominant12Whatcanbedone?13Conclusion15Appendices17TheAmericanTextileManufacturersInstitute1130ConnecticutAve,NWWashingtonDC20036202-862-0500/f:202-862-0570’sshareoftheU.S.textileandapparelmarketwillrisetoovertwo-thirdsoftheU.S.marketwithin24months.Ifthisoccurs,theresultwillbethelargestwaveofjoblossesandplantclosuresinU.S.textileandapparelhistoryandwilllikelyresultintheeliminationoftextilesandapparelasamajormanufacturingemployerintheUnitedStates.TotalU.S.textileandappareljoblossesfrom2004-6couldreach630,000,withover1,300textileplantsclosingintheUnitedStatesoverathree-yearperiod.JoblossesintheUnitedStateswillbeonlyafractionofthosethatwilloccuroverseasasanestimated$42billioninexportordersfromothercountriesshifttoChina.Thiswouldprobablyrepresentoneofthelargestshort-termtransfersofwealthinthehistoryofthedevelopingworld.Alargenumberofcountries,fromMexicotoSouthAfrica,fromBangladeshtoHaiti,fromthePhilippinestoTurkey,dependonexportsoftextilesandappareltotheU.S.marketformuchoftheirforeignexchange,nottomentionthelivelihoodsofmillionsoftheirworkers.TheUnitedStatesisfarandawaytheworld’slargesttextileandapparelconsumingnation,importing$75billionworthofsuchgoodsfrommorethan70countrieslastyear1.Afterareviewofthetradedata,thisanalysisalsoconcludesthatcountrieswithtradepreferences--Mexico,thenationsoftheCaribbean,CentralAmericaandSub-SaharanAfrica,amongothers--arenomorelikelytoretainmarketshareagainstChinathananyofthetraditionalexportingpowersintheFarEast.ThedependenceofasubstantialportionoftheU.S.textileindustryonthesepreferentialagreementsisasignificantreasonthatthetextileoutlookforU.S.producersissogrim.Mexico,theCaribbeanandCentralAmericaaccountforover$10billionworthofU.S.textileexports--andnoneofthesecountriesappearscapableofcounteringtheenormous1AccordingtoWTOfigures,theU.S.imports50percentmoretextilesandclothingthantheEU,andmorethanthreetimesasmuchasJapan.ProjectedTextileandApparelExportLossestoChinaCountry/RegionLoss($mil.)CBI-$6,279Mexico-$5,423EU-$2,477Canada-$1,861Honduras-$1,763Korea,South-$1,620Indonesia-$1,390Turkey-$1,316DominicanRepublic-$1,287Guatemala-$1,265Philippines-$1,236Italy-$1,218Thailand-$1,161Bangladesh-$1,051ElSalvador-$1,015SUB-SAHARANAFRICA-$926ANDEAN-$731ProjectedChineseControl13%20%22%44%71%0%80%20022003200420052006U.S.textileandapparelimportmarket2advantagesthatChina’scurrencyandsubsidyregimegrantitsexportmachine.Inaddition,theabilitytosourcefabricandyarnfromoutsidetheregiondoesnotappeartohelp–Sub-SaharanAfrica’sexports,whichmaycontainsuchyarnsandfabrics,felljustasrapidlyasdidtheCBI’sinChinade-controlledcategories.Asaresult,U.S.textileproductionisexpectedtoplungeand,inrelativelyshortorder,manyofthenearlyonemillionU.S.workerswhodependontheU.S.textilecomplexappearlikelytolosetheirjobs.2Indeed,becausetextileformationisaprecursortoapparelassembly,heavytextilejoblossesareexpectedtobegininmid-2004andthencontinueinto2005and2006.Onetextileexecutivepredictedthattheindustrycouldbe“closingaplantaday”ifChinaisnotrestrained.Thereport’sconclusionsarebasedonasharpdropinChinesepricesoncequotasonapparelproductswereremovedin2002.Duringthosetwelvemonths,theaverageChinesepricefellby44percent,decliningfrom$6.23persquaremeterto$3.37persquaremeter,adropof$2.86persquaremeter.PricesbysuppliersotherthanChinafellaswellbutnotbynearlyasmuch.Theaveragepriceofothersuppliersfellby2percent,droppingfrom$3.55persquaremeterto$3.47persquaremeter.TheimpactontradepatternsfromtheChinesepricedropswasswiftanddefinitive.Chinaincreaseditsexportsinthe29apparelcategoriesby$980millionin2002whileallothersupplierssawtheirexportsdropby$813million.Thistrendalsoacceleratedinthefirstquarterof2003,whenChineseimportsincreasedby$493million(comparedtoQ12002)whileimportsfromtherestoftheworldfellby$71million.Theanalysisalsoexaminedother“proxies”forChinesebehaviorinapost-quotaworld.ItlookedatChinesepenetrationoftheJapaneseandAustraliantextileandapparelmarkets(whichhavenoquotaregimeinplace)andatimportsintotheU.S.ofsimilarmanufacturedgoodswhichhavenotbeenrestrainedbyquotas.BothproxiesfoundChinesepenetrationofthesemarketsat70percentandabove.Theproxiesbelietheoft-statednotionthatimportersorretailerswillseekto“spreadtherisk”bysourcingfrommultiplemajorplatforms.Ineachcase,importersorretailersinsteadembracedthecostsavingsavailablefromChinaandfocusedalmostalloftheirsourcingthere.TheanalysisillustratestheneedfortheU.S.governmenttomovequicklytoinitiateuseofthespecialChinatextilesafeguardtorestrainChineseimportsoncequotasareremoved.Withoutearlyandcomprehensiveuseofthespecialtextiles