Impact of the Quota Phase Out

As previously stated, the elimination of clothing and textile quotas was done in four phases, starting in 1995 and ending in 2005. Each party to the ATC, including the United States, was to specify when their existing quotas would be eliminated.

If the existing quotas were constraining imports, their removal should cause a subsequent increase in imports. U.S. trade data for phases 2, 3 and 4 of the ATC quota removal reveals a more complicated pattern.

For goods included in phase 2, there was no apparent increase in the growth of imports following the elimination of their quotas on January 1, 1998.

Similarly, products included in phase 3 did not jump sharply after the elimination of their quotas on January 1, 2002. Items included in phase 4 did show a modest growth spurt in 2005, but then sharply declined in 2006.

Interpreting Pre- and Post-ATC Trade

In general, the trade data confirm many of the predictions by the market analysts prior to the termination of the ATC quotas. Global clothing and textile trade is growing more rapidly after 2005 than it did before 2005 and China is a major beneficiary of the greater growth.

China secured nearly three-quarters of the year-on-year increase in clothing trade between 2004 and 2005, and its increase in textiles exports between 2004 and 2005 was slightly greater than the total rise on global textiles trade. Plus, as predicted, the United States is importing more of its clothing and textiles from China.

However, when examined more closely, there are patterns in the trade data that either were not anticipated or are not consistent with some of the analysts' predictions. For example, while there has been the expected market growth, both in the global and U.S. market, the foreseen major shifts in production have not occurred.

Instead, the data suggests that most nations were able to maintain the value of their clothing and textiles exports after the termination of the ATC quotas, possibly indicating that the preferential trade programs were helping some nations clothing and textile trade.

However, most countries were unable to significantly increase their exports, while China- and to a lesser extent, India- were able to expand their exports. In other words, China was able to increase its share of the global and U.S. clothing and textile markets by capturing most of the market growth.

Also, the "surge" in Chinese clothing and textile exports in 2005 was smaller than many analysts suggested it would be. For example, China's shares of the U.S. clothing and textile markets in 2006 - 29.1% for clothing and 14.9% for textiles - is well below the levels projected by the ATMI study.

This in part may be due to the imposition of safeguard measures in 2005 and 2006. However, the under utilization of the U.S.-China MOU quotas in 2006 may indicate that much of the increase in Chinese clothing and textile exports has passed.

Similarly, U.S. clothing and trade data and industry figures for the U.S. clothing and textile industry present a mixed picture of the impact of the end of the ATC quotas on U.S. clothing and textile production and employment.

The value of U.S. clothing textile production rose during the initial stages of the ATC quota phase out, with the major declines starting after China's WTO accession. By contrast, employment for both the clothing and textile industry declined steadily from 1990 to 2005, but not necessarily concurrently with the elimination of quotas.