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Obama faces tricky dilemma on restricting growing Chinese garment imports

18
Nov '08
China's share of US apparel imports reached their highest ever level in September 2008, according to an analysis in The Source, the monthly review from Oxford-based apparel trading consultancy, Clothesource.

The analysis shows that American buyers moved away from China from September 2007 to March of this year, when Chinese imports reached a mere 20%. Of US clothes imports. The move was based on a falling dollar and fears of rising prices after media reports of rapid pay hikes. Clothesource analysed the square metres of imported clothes reported in latest data from the US government's Office of Textile and Apparel,

But since March, China's share has grown every month. The reason, says Clothesource CEO Mike Flanagan, is that wage rises have far less impact on clothes prices than many think

“Depending on the garment, wages account for 10-20% of the production cost for most apparel” said Flanagan. “And as the Chinese currency rose in value, the rising price of many dollar-denominated inputs – from oil through imported cotton, to the cost of freight - hit Chinese factories less than their competitors in Asia or the Americas”

“Actual factory-gate prices of clothes in China hardly moved” he added. “For most of 2008, clothes inflation in Chinese currency has been from 1.5% to 2.5%. On average, US buyers, even with the sinking dollar, have paid between 5% and 10% more in dollars than a year ago.”

The news comes at an intriguing moment for US President-elect Barack Obama. During his campaign, he pledged support to US yarn and fabric makers in their campaign for punitive taxes on Chinese imports when America's quotas are withdrawn at the end of this year. But on November 15, the US and the other 19 members of the G-20 pledged they were “rejecting protectionism” and “would refrain from raising new barriers to trade”.

While Chinese imports were thought to be falling, the contradiction didn't matter. Now they are growing again, Obama may be faced with a tricky dilemma.

Clothesource


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