Textile Safeguard Procedures Should Be Improved
GAO-05-296: Published: Apr 4, 2005. Publicly Released: Apr 4, 2005.
U.S. textile and apparel imports from China have more than doubled in value since China became a World Trade Organization (WTO) member. When joining the WTO, China agreed to a special textile safeguard mechanism applicable only to that country. In this report, GAO (1) describes the mechanism, (2) describes requests for safeguard action filed by U.S. producers and the results of these requests, and (3) evaluates U.S. agency procedures for transparency and accessibility.
The WTO China textile safeguard is a transitional mechanism that allows the United States and other WTO members to temporarily restrict growth in specific textile and apparel imports from China through the end of 2008 even though textile and apparel quotas in general were eliminated on January 1, 2005. The U.S. government's interagency Committee for the Implementation of Textile Agreements (CITA) has established procedures that explain to the public how it will consider safeguard action requests. These procedures stipulate that when requesting safeguard actions, producers must submit data on imports, market share, U.S. production, and additional information showing how imports from China have adversely affected U.S. industry or any other data deemed pertinent. CITA has applied safeguard quotas on specific products in response to 4 out of 5 U.S. industry requests that were based primarily on evidence of actual market disruption. Twelve threat-based requests remain unresolved. Procedural shortcomings have impaired effective application of the China textile safeguard. First, CITA's procedures created uncertainty about when, how, and under what circumstances it would consider threat-based requests. Seventeen months elapsed before CITA issued any procedures about the China textile safeguard, and the procedures did not clearly indicate how CITA would proceed in threat-based cases. Also, a court-ordered injunction prevents further government consideration of threat-based cases until litigation is resolved. GAO does not take any position on the legal issues involved. Regardless of the result, this situation will affect the speed, scope, and duration of potential relief available to U.S. producers who made these requests. Second, the unavailability of production data on about 20 percent of textile and apparel product categories--data that is necessary to fulfill CITA filing requirements--inhibits equal access to the safeguard. Beyond these issues, uncertainty about future developments in global textile trade makes the future impact of the safeguard unclear.
Recommendations for Executive Action
Status: Closed - Implemented
Comments: The Governments of the United States and the People's Republic of China negotiated a bilateral agreement concerning trade in textile and apparel products that eliminated the issues we identified in our report that were the basis for our recommendations. The memorandum of understanding between the two governments entered into force on January 1, 2006 and terminated on December 31, 2008. There have been no requests for relief from industry for safeguard action since the implementation of the bilateral agreement. As the China textile safeguard could only be applied through the end of 2008 and has expired, no future requests will be forthcoming.
Recommendation: In the event that the courts rule that CITA may process threat-based requests for China textile safeguards, CITA should amend its procedures to clarify how it will proceed in threat-based cases, including the information that producers should submit in such cases.
Agency Affected: Committee for the Implementation of Textile Agreements
Status: Closed - Implemented
Comments: The Governments of the United States and the People's Republic of China negotiated a bilateral agreement concerning trade in textile and apparel products that eliminated the issues we identified in our report that were the basis for our recommendations. The memorandum of understanding between the two governments entered into force on January 1, 2006 and terminated on December 31, 2008. There have been no requests for relief from industry for safeguard action since the implementation of the bilateral agreement. As the China textile safeguard could only be applied through the end of 2008 and has expired, no future requests will be forthcoming. Department of Commerce officials indicated they would consider our recommendations in their 60-day letter. Subsequently, the United States signed a comprehensive bilateral agreement with the People's Republic of China on November 8, 2005. China agreed to limit exports of many textile and apparel product categories to the United States. The United States agreed to not apply the safeguard for those product categories subject to export limits and to use restraint when applying it to other products. No producer has requested relief under the safeguard since the implementation of the agreement. Additionally, both the safeguard and U.S.-China bilateral agreement expired at the end of 2008. As a result, the agreement eliminated the problems our recommendations sought to address in the short term, and they are no longer relevant.
Recommendation: To enhance access to safeguard relief for all segments of the textile and apparel industry that may face import surges, the Department of Commerce, as CITA's chair, should review the products and categories for which U.S. Bureau of Census production data are unavailable and, with public input, conduct a risk assessment aimed at identifying industry sectors at high risk of experiencing import surges from China and associated market disruption. Further, on the basis of the risk assessment, Commerce's Office of Textiles and Apparel should work with the Census Bureau to explore options to make production data concerning these industry sectors available for safeguard requests. In some instances it might not be feasible to make such data publicly available due to disclosure limitations and data (or analysis of trends in that data) possibly may need to be limited to CITA.
Agency Affected: Department of Commerce