How Does The United States Announce The Abolition Of Preferential Treatment In Developing Countries And Its Impact On The Textile Industry?

On February 18th, the US Trade Representative Office (USTR) issued a formal announcement recently, announcing the cancellation of preferential treatment for WTO developing countries, including China, Hongkong and other 25 economies.

According to the announcement issued by the office of the United States trade representative, the 25 economies include Albania, Argentina, Armenia, Brazil, Bulgaria, China, Columbia, Costa Rica, Georgia, China Hongkong, India, Indonesia, Kazakhstan, Kyrgyz, Malaysia, Moldova, Montenegro, North Macedonia, Romania, Singapore, South Africa, South Korea, Thailand, Ukraine and Vietnam.

According to the provisions of the world trade organization, all the developing countries recognized by the world trade organization can enjoy Special and Differential treatment, which is lower than that of the developed countries in terms of the speed and extent of tax reduction for various products. The preferential treatment of developing countries has become the trade foundation between developed and developing countries for many years.

In recent years, the United States has repeatedly expressed its dissatisfaction with the existing laws and regulations of WTO, especially the regulations concerning the list of developing countries. The United States believes that it is unfair for the world's second largest economies to make use of all the WTO's preferences and the United States has no right to impose compensatory tariffs. The US "official propaganda" is only to implement measures, so as to change the status quo and occupy a more favorable position in international trade, not just for China.

The unilateral declaration of the United States to abolish the status of developing countries in China is mainly aimed at putting pressure on China in bilateral trade, in this way to combat China's export to the US trade ecological environment. The practice is similar to the previous unilateral increase in import tariffs. The follow-up development needs to wait for the change, believing that the Chinese government will give corresponding counterattack.

If the United States cancels preferential treatment in developing countries, the impact on Sino US trade will be inevitable. But there is no need to panic too much. There is a case of unilateral tariff increase in the United States. The incident can also be used as a pretext for similar events.

What's the impact on China's export of textile and clothing?

The trade war of 2019 has fully demonstrated that the United States has a considerable dependence on China's exports, and both sides recognize each other's importance. The US move is not only aimed at China, but many textile and garment exporting countries such as Vietnam, India, Indonesia and Thailand have been unilaterally cancelled preferential treatment.

In 2019, the United States imported 111 billion 283 million dollars of textile and clothing, an increase of 0.29% over the same period last year. Imports from China amounted to 36 billion 452 million US dollars, down 10.16% from the same period last year, 14 billion 436 million US dollars from Vietnam, an increase of 11.61% over the same period last year, and 8 billion 51 million US dollars from India, an increase of 4.96% over the same period last year.

The US did not change the competition pattern of the three big exporters, and the United States could not get rid of its dependence on textile and clothing imports. China, Vietnam and India jointly exported US $58 billion 939 million of textiles and clothing to the United States, accounting for 52.96% of the total imports of the United States. We can say that these three countries are the importing countries that the United States cannot do without. But predictably, there is no doubt that low-end products are flowing to less developed areas. It is an opportunity for Burma and Bangladesh.

In the past 5 years, remarkable progress has been made in Burma's textile and garment industry. Its exports increased from US $900 million in 2012 to US $4 billion 37 million in the 2018-19 fiscal year. Burma has cheaper labour costs and shipping costs than Vietnam and other places, and zero tariff preferences for exporting to the EU. At the same time, the underdeveloped areas are also full of uncertainties. The Bangladesh garment manufacturing and export association president said that in the past 7 months, 59 small and medium-sized garment enterprises were closed down and 25900 workers were out of work. The rise of competitors has led to a decline in Bangladesh's exports, workers' wages are not guaranteed, and businesses are often faced with strikes. This is also the risk of low threshold of low end manufacturing.

For China's textile industry, it is still an era of risks and opportunities. Southeast Asian textile is becoming a strong opponent of China's textile industry. The delicate relationship between China and the United States brings more uncertainty to the future trade between the two countries. But we should also see the opportunities in the challenge: "one belt and one road" is more smooth, and the advantages of China's textile industry chain are still unmatched by India, Vietnam and other countries. Plus, we also have a huge domestic demand market. We have experienced the trough, but after the storm will see the rainbow, we believe that the world textile is still looking at China.