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Summary:
The elimination of the last set of quotas of the Agreement on Textiles and Clothing (ATC) on January 1, 2005, ostensibly brought about the end of decades of quantitative restrictions on the international exchange of clothing and textiles. Trade analysts around the world expected that the final lifting of import limits would foster increased growth in clothing and textile trade, as well as a restructuring of clothing and textile production. In particular, some market watchers predicted a dramatic shift of clothing and textile production to China at the expense of many other nations. For the U.S. domestic market, the end of the ATC quotas was expected to bring about three major changes. First, there would be a sharp increase in U.S. clothing and textile imports. Second, there would be a major shift in sourcing clothing and textile imports to China. Third, the influx of clothing and textile imports was expected to have a deleterious effect on the U.S. clothing and textile industry. Fourth, because of the anticipated negative impact on the U.S. clothing and textile industry, there was a belief that the U.S. government would make use of various trade remedies to fend off the rising tide of clothing and textile imports. The events of the first two years of post-ATC quotas -- 2005 and 2006 -- both confirmed and contradicted the experts' predictions. The global clothing and textile market did grow faster over the last two years than before, but there has not been the anticipated sharp shift in production to China. Similarly, while U.S. clothing and textile imports continued to grow in 2005 and 2006, it is unclear if the end of the ATC quotas was the main cause of that growth. In addition, while anecdotal evidence from the U.S. clothing and textile industry indicates greater competition from China, trade data and industry production levels do not reveal clear evidence that the termination of the ATC was a major contributing factor to the recent loss of employment in the U.S. clothing and textile industry. One major factor complicating analysis of post-ATC clothing and textile trade was the decision by the United States (and the European Union) to utilize available trade remedies to forestall the impact of end of quantitative restrictions on clothing and textile trade. After the United States imposed safeguard measures in 2004 and 2005, China and the United States negotiated a "memorandum of understanding" that continued quotas on selected items until 2008. For Congress, post-ATC clothing and textile trade has raised several issues it may choose to consider. First, Congress may consider modifying current trade remedy laws, particularly those dealing with safeguard measures and countervailing duties. Second, Congress may wish to examine in more detail the impact of the end of the ATC quotas on the U.S. clothing and textile industry. Third, Congress may also consider examining the effectiveness of various trade preference programs, especially as they relate to clothing and textiles. This report will be updated as circumstances require.
