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Pact aids garment industry

Pact aids garment industry

A bilateral US-China trade agreement intended to boost beleaguered textile and apparel

manufacturers in the American south has provided an unforeseen benefit to Cambodia's

vulnerable garment industry.

The recently signed pact to limit surging Chinese textile exports to the United States

has given Cambodia's garment industry three more years to gear up for competition

in the post-quota textile market.

Since the Multi-fiber Agreement (MFA) quota system, which guaranteed Cambodia access

to American markets, expired in January the international garment market has been

flooded with inexpensive Chinese products. Within the first eight months of this

year, China's exports to the United States jumped more than 46 percent and totaled

nearly $17.7 billion.

Certain categories of Chinese products - such as cotton trousers, cotton-knit shirts

and synthetic filament fabric - have grown in excess of 1,000 percent, according

to data from the American Manufacturing Trade Action Coalition, one of the chief

backers of the agreement between the US and China.

China's rapid ascendancy in garment manufacturing has been seen as a serious threat

to the industry in small countries such as Cambodia.

The agreement, which limits US imports of Chinese textile and apparel products in

all or parts of 34 sensitive categories until the end of 2008, has been welcomed

by officials in Cambodia's garment sector.

"Cambodia will be able to take advantage of this," said Ken Loo, secretary

general of Cambodia's Garment Manufacturers Association. "[The pact will mean]

that we should continue to see growth for the next three years."

Loo said the agreement gives Cambodia a "second chance" to compete head-on

with China.

Karla Quizon, head of the Cambodia Mekong Private Sector Development Facility (MPDF),

called the unexpected quota extension a "welcome twist for Cambodia."

Cambodia's garment sector continued to grow in 2005, despite China's meteoric rise.

GMAC reported that Cambodia's apparel exports increased 4 percent during the first

nine months of this year, compared with the corresponding period in 2004. The export

value for Cambodian garments during the first nine months of 2005 totaled $1.57 billion.

But officials in Cambodia cautioned against complacency.

"[Cambodian manufacturers] have to realize that this extended lease on life

will come to an end on December 31, 2008," Loo said. "We should make full

use of these three years to ensure that our industry is [prepared] to compete with

China when this agreement comes to an end."

Quizon said that though Cambodia's garment sector is recognized for its high labor

standards, the industry must work to reduce production costs to remain competitive.

"At the end of the day, productivity is the key," she said, adding that

such factors as a quick production turnaround are critical to keeping costs down.

As part of the deal Beijing made with Washington in the late 1990s that enabled China

to join the WTO, the US reserved the right to impose selective "safeguards"

- effectively, new quotas - on Chinese textile and apparel imports if the US government

could prove that the post-MFA import surge disrupted the American market. The trade

restraints were limited to one year, with the option of annual renewal until 2008.

The new bilateral agreement did away with the uncertainty and delays associated with

the annual renewal of the safeguard measure. Instead, it locked in future quotas

that will be allowed to rise at annual rates ranging from 8 to 17 percent, depending

on the product and year, beginning on January 1, 2006, and lasting until the end

of 2008.

"The limits set forth in the agreement are only slightly more generous than

what they would have been under the [old safeguards]," Loo said.

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