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entitled 'U.S.-China Trade: Textile Safeguard Procedures Should Be 
Improved' which was released on April 5, 2005. 

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Report to Congressional Committees: 

April 2005: 

U.S.-China Trade: 

Textile Safeguard Procedures Should Be Improved: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-296]: 

GAO Highlights: 

Highlights of GAO-05-296, a report to congressional committees: 

Why GAO Did This Study: 

U.S. textile and apparel imports from China have more than doubled in 
value since China became a World Trade Organization (WTO) member. When 
joining the WTO, China agreed to a special textile safeguard mechanism 
applicable only to that country. In this report, GAO (1) describes the 
mechanism, (2) describes requests for safeguard action filed by U.S. 
producers and the results of these requests, and (3) evaluates U.S. 
agency procedures for transparency and accessibility. 

What GAO Found: 

The WTO China textile safeguard is a transitional mechanism that allows 
the United States and other WTO members to temporarily restrict growth 
in specific textile and apparel imports from China through the end of 
2008 even though textile and apparel quotas in general were eliminated 
on January 1, 2005. The U.S. government’s interagency Committee for the 
Implementation of Textile Agreements (CITA) has established procedures 
that explain to the public how it will consider safeguard action 
requests. These procedures stipulate that when requesting safeguard 
actions, producers must submit data on imports, market share, U.S. 
production, and additional information showing how imports from China 
have adversely affected U.S. industry or any other data deemed 
pertinent. 

CITA has applied safeguard quotas on specific products in response to 4 
out of 5 U.S. industry requests that were based primarily on evidence 
of actual market disruption. Twelve threat-based requests remain 
unresolved. 

Procedural shortcomings have impaired effective application of the 
China textile safeguard. First, CITA’s procedures created uncertainty 
about when, how, and under what circumstances it would consider threat-
based requests. Seventeen months elapsed before CITA issued any 
procedures about the China textile safeguard, and the procedures did 
not clearly indicate how CITA would proceed in threat-based cases. 
Also, a court-ordered injunction prevents further government 
consideration of threat-based cases until litigation is resolved. GAO 
does not take any position on the legal issues involved. Regardless of 
the result, this situation will affect the speed, scope, and duration 
of potential relief available to U.S. producers who made these 
requests. Second, the unavailability of production data on about 20 
percent of textile and apparel product categories—data that is 
necessary to fulfill CITA filing requirements—inhibits equal access to 
the safeguard. Beyond these issues, uncertainty about future 
developments in global textile trade makes the future impact of the 
safeguard unclear. 

Share of $12 Billion in U.S. Imports from China Subject to Safeguards 
or Requests: 

[See PDF for image]

[End of figure]

What GAO Recommends: 

If the courts rule that CITA may process threat-based cases, GAO 
recommends that CITA clarify its procedures for such cases. 

GAO also recommends that the Commerce Department take actions to make 
production data more available for industry sectors that are at risk of 
experiencing disruptive import surges. 

Agency officials did not comment on the first recommendation due to 
ongoing litigation but had concerns about the descriptions of CITA 
procedures. Agency officials disagreed with the second recommendation, 
stating that such actions would not be productive. GAO made some 
revisions in response, but continues to believe that the 
recommendations would make the textile safeguard more transparent and 
accessible. 

www.gao.gov/cgi-bin/getrpt?GAO-05-296. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Loren Yager at (202) 512-
4347 or yagerl@gao.gov. 

[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

China Textile Safeguard Permits Control over Surging Imports: 

CITA Has Applied Market-Disruption-Based Safeguards but Threat-Based 
Requests Remain Unresolved: 

Procedural Shortcomings Have Impaired Application of China Textile 
Safeguard: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Paragraph 242 of the Working Party Report on China's 
Accession to the WTO: 

Appendix III: Summary of CITA Determinations on Market-Disruption-Based 
Requests to Date: 

Appendix IV: Textile and Apparel Products Imported from China for Which 
U.S. Production Data Are Unavailable: 

Appendix V: Threat-Based Requests for Safeguard Action Filed by U.S. 
Producer Groups, 2004: 

Appendix VI: Comments from the Committee for the Implementation of 
Textile Agreements: 

GAO Comments: 

Appendix VII: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Staff Acknowledgments: 

Tables: 

Table 1: Summary of Import Data for Product Categories for Which U.S. 
Production Data Are Unavailable: 

Table 2: Import Data for Product Categories for Which U.S. Production 
Data Are Unavailable: 

Figures: 

Figure 1: U.S. Production (Shipments) in Textile and Apparel Sectors, 
1995-2004: 

Figure 2: U.S. Domestic Textile and Apparel Employment, 1995-2004: 

Figure 3: U.S. Textile and Apparel Imports from All Countries, 1995-
2004: 

Figure 4: U.S. Textile and Apparel Imports from China, 1995-2004: 

Figure 5: CITA Timeline for Taking Action on Textile Safeguard Requests 

Figure 6: Share of U.S. Imports from China Subject to Safeguards or 
Requests: 

Figure 7: Monthly Brassiere Imports from China, January 1999 to 
December 2004: 

Figure 8: Comparison of Timelines for Actual Threat-Based Request with 
Possible Market-Disruption-Based Request: 

Figure 9: Sock Imports from China, January 1999 to December 2004: 

Figure 10: U.S. Imports of Textile and Apparel from India, Pakistan, 
and Vietnam, 1995-2004: 

Abbreviations: 

CITA: Committee for the Implementation of Textile Agreements: 

OTEXA: Office of Textiles and Apparel: 

WTO: World Trade Organization: 

Letter April 4, 2005: 

The Honorable Frank R. Wolf: 
Chairman: 
The Honorable Alan B. Mollohan: 
Ranking Minority Member: 
Subcommittee on Science, State, Justice and Commerce, and Related 
Agencies: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Richard C. Shelby: 
Chairman: 
The Honorable Barbara A. Mikulski: 
Ranking Minority Member: 
Subcommittee on Commerce, Justice, and Science: 
Committee on Appropriations: 
United States Senate: 

Concern about textile and apparel imports from China has increased over 
the last several years as the 50-year-old global quota system that 
regulated trade in this industry was phased out and finally terminated 
on January 1, 2005. Since China joined the World Trade 
Organization[Footnote 1] (WTO), U.S. imports of textile and apparel 
products from that country have grown rapidly in value from about $7 
billion in 2001 to about $15 billion in 2004[Footnote 2] and may 
increase further now that all remaining quotas have been removed. 

In anticipation of China's joining the WTO, the United States sought 
and obtained that country's agreement to a textile safeguard that 
allows WTO members to impose temporary quotas on Chinese-origin textile 
and apparel imports--thus permitting the United States to limit 
disruptive import surges in ways consistent with long-standing U.S.- 
China bilateral arrangements. The United States and China originally 
agreed on the safeguard language in the negotiations that led to 
Congress granting China permanent normal trade relations status and 
cleared the way for that country to become a member of the WTO. 
Relevant U.S. government agencies have received requests for relief 
from U.S. industry and have applied safeguard measures. However, 
domestic producers and importers of textile and apparel products have 
expressed some concerns about the procedures the United States has 
employed for China textile safeguard cases. 

In May 2003, the House Appropriations Committee's Subcommittee on 
Commerce, Justice, and State, the Judiciary, and Related Agencies held 
hearings regarding U.S. government efforts to support American 
businesses adversely affected by imports from China. In light of 
concerns expressed at this hearing, the House-Senate conference report 
on fiscal year 2004 appropriations legislation[Footnote 3] requested 
that GAO monitor the efforts of U.S. government agencies responsible 
for ensuring free and fair trade with China. In subsequent discussions 
with your staff, we agreed to respond by providing a number of reports 
on relief mechanisms available to U.S. producers that are adversely 
affected by unfair or surging imports, and the manner in which they 
have been applied to China.[Footnote 4] In this report, we: 

* describe the China textile safeguard,

* describe the requests for safeguard action filed by domestic industry 
and the results of these requests, and: 

* evaluate agency procedures for transparency and access to safeguard 
measures and identify additional issues that may affect application of 
such measures in the future. 

To address the first objective, we reviewed U.S. laws and procedures as 
well as relevant WTO agreements. We interviewed officials from the five 
member agencies of the U.S. government's Committee for the 
Implementation of Textile Agreements (CITA), as well as WTO officials 
and other experts on trade law. 

To address the second and third objectives, we obtained and analyzed 
relevant information from both governmental and private sector sources. 
We reviewed the official record on each of the safeguard requests that 
CITA had considered as of the end of 2004. To clarify the views of 
those favoring and opposing application of safeguard measures, we spoke 
with officials from trade associations representing U.S. textile and 
apparel producers, as well as importers and retailers. We interviewed 
Chinese government officials and, to obtain a broader perspective on 
global textile trade in a postquota environment, spoke with 
representatives of additional textile and apparel exporting and 
importing countries. Finally, we conducted extensive analyses of 
textile and apparel trade and economic data. We performed our work from 
January 2004 to January 2005 in accordance with generally accepted 
government auditing standards. Appendix I contains a more detailed 
description of our scope and methodology. 

Results in Brief: 

The China textile safeguard allows WTO members to place defined limits 
on particular textile and apparel imports from China through the end of 
2008, despite the general elimination of most textile quotas on January 
1, 2005. When a member finds that certain Chinese-origin imports are 
"due to market disruption, threatening to impede the orderly 
development of trade" in these products, it may request consultations 
with China and, at the same time, impose specific quota 
limits.[Footnote 5] When requesting consultations, the importing member 
provides China with a statement showing the existence or threat of 
market disruption and the role of Chinese imports in that disruption or 
threat. If the two members cannot agree on another solution, the quota 
limits remain in place. In the United States, the interagency Committee 
for the Implementation of Textile Agreements (CITA) has adopted 
procedures that explain the process it follows in considering safeguard 
action requests from the public. CITA's procedures stipulate that 
requests must include import, market share, and U.S. production data, 
and additional information showing how imports from China have 
adversely affected the domestic industry, such as their effect on 
prices in the United States, or any other data deemed to be pertinent. 
They also establish a 15-week approximate time frame for deciding 
whether to impose safeguard measures. The duration of any safeguard 
applied can vary a great deal--from 3 months to a year--depending on 
when U.S. producers submit their requests. 

During 2003 and 2004, U.S. producer groups claimed market disruption 
and requested safeguard actions against five Chinese products, 
including brassieres and dressing gowns. In 4 of these cases, CITA 
determined, among other things, that the market had been disrupted and 
that Chinese imports had played a role in that disruption, and applied 
safeguard measures. During 2004, U.S. producers also filed 12 "threat- 
based" requests for safeguard action to prevent future market 
disruption. In 9 of these requests, U.S. producers sought action to 
control expected growth in products to be removed from quota 
restrictions on January 1, 2005. In the remaining 3 instances, U.S. 
producers requested reapplication of previously imposed safeguards 
slated to expire in December 2004 on the grounds that this expiration 
threatened a renewal of disruptive import surges. CITA agreed to 
consider these 12 requests and began investigating. Decisions on these 
cases were due beginning in February 2005, but have remained unresolved 
due to a pending lawsuit against CITA by U.S. textile and apparel 
importers. 

Procedural shortcomings have impaired application of the China textile 
safeguard. First, we found that CITA was slow to issue procedures and 
that the procedures do not provide clear guidance about threat-based 
requests. The procedures were not issued until about 17 months after 
China joined the WTO and after producer groups requested safeguard 
actions. When issued, the procedures focused primarily on market- 
disruption-based requests. U.S. importers and producers that we 
consulted in preparing this report experienced uncertainty about 
whether or how threat-based cases would proceed. In December 2004, U.S. 
importers filed a lawsuit to prevent CITA from considering these threat-
based requests, alleging that CITA violated its own procedures in 
accepting them. The Court of International Trade has enjoined CITA from 
considering threat-based requests pending further judicial review. 
Regardless of the result, this situation will affect the speed, scope, 
and duration of potential relief available to U.S. producers. Second, 
we found that uneven availability of production data hinders access to 
the safeguard. U.S. government production data are unavailable on about 
half of the total value of textile and apparel imports from China. In 
the event that producer groups want to file a safeguard request on a 
product for which production data are unavailable, they must collect 
their own data to meet the safeguard filing requirements. This can be a 
difficult and time-consuming process that limits access to the 
safeguard for some U.S. producers. 

We recommend (1) CITA take actions to clarify its procedures about how 
it will proceed in threat-based cases in the event that the courts rule 
that CITA may process such cases and (2) the Department of Commerce 
take actions to improve the availability of required U.S. production 
data for industry sectors that are most likely to experience 
difficulties due to Chinese import surges. The Department of Commerce, 
in its capacity as CITA chair, compiled comments from the other member 
agencies into one letter. With respect to our first recommendation, 
CITA noted that our review focused on issues involved in the ongoing 
litigation, and, per a Department of Justice request, it could not 
comment on certain parts of the report. Nevertheless, CITA expressed 
concern about how we described the timing of issuance and content of 
CITA procedures as they relate to threat-based requests. CITA also 
expressed concern that some of our conclusions in the report seemed to 
be premised on the arguments of private parties in ongoing litigation. 
Our report does not take any position on the legal issues that are the 
subject of the ongoing litigation between the U.S. Association of 
Importers of Textiles and Apparel and the United States, including 
whether CITA's procedures allow for threat-based cases. Nevertheless, 
we continue to believe the procedures could be improved in this regard 
to further increase clarity and transparency. We believe the report's 
conclusions represent a balanced summation of the facts, based on our 
own analysis of evidence obtained from both government and private- 
sector sources. CITA disagreed with our second recommendation believing 
that it would not be productive. Additionally, CITA officials pointed 
out some constraints in making more production data available. We 
modified our discussion of unavailable production data and our 
recommendation to reflect some of the limitations in the publication of 
U.S. government production statistics. However, we continue to be 
concerned that some potential requesters may be disadvantaged in the 
future in light of the potential difficulties associated with private 
production data collection. 

Background: 

U.S. textile and apparel production and employment have both declined 
over the past decade. Textile and apparel imports have grown throughout 
this period, with China recently playing a major role in this growth. 
Until recently, CITA limited this growth by administering quota limits, 
including limits on imports from China. However, with the final removal 
of all quotas on January 1, 2005, textile and apparel trade is now 
governed by the same WTO rules as apply to trade in other sectors. 

U.S. Textile Production and Employment Have Declined: 

U.S. textile and apparel production and employment have both declined 
over the last decade. Production of apparel (and textiles to a lesser 
extent) tends to be relatively labor intensive. Consequently, 
developing countries, which tend to have significantly lower labor 
costs, have a competitive advantage. As shown in figure 1, U.S. 
producers' shipments of apparel products fell by over half between 1995 
and 2004, to about $56 billion in 2004. Similarly, shipments by textile 
mills (yarns, threads, and fabrics) fell by about a third, to about $41 
billion. On the other hand, textile product mills (carpets, curtains, 
bedspreads) remained relatively stable over the time period, with about 
$38 billion in shipments in 2004.[Footnote 6]

Figure 1: U.S. Production (Shipments) in Textile and Apparel Sectors, 
1995-2004: 

[See PDF for image]

Notes: Industry shipments may be made to either the U.S. or foreign 
(export) markets. 

Textile mills produce inputs such as yarns, threads, and fabrics. 
Textile product mills produce goods such as carpets, curtains, 
bedspreads, and other textile products besides apparel (clothing). 

[End of figure]

Figure 2 shows U.S. employment losses in this industry are also largely 
attributable to declines in the apparel sector. From 1995 through 2004, 
overall employment in this industry fell by over half, from about 
1,502,000 employees in 1995 to about 701,000 in 2004. During that time, 
the apparel sector lost 65 percent of its employment, while the textile 
mills sector contracted by 49 percent and the textile product mills 
sector contracted by 19 percent. 

Figure 2: U.S. Domestic Textile and Apparel Employment, 1995-2004: 

[See PDF for image]

Note: Textile mills produce inputs such as yarns, threads, and fabrics. 
Textile product mills produce goods such as carpets, curtains, 
bedspreads, and other textile products besides apparel (clothing). 

[End of figure]

Textile and Apparel Imports Have Grown, Especially from China: 

As shown in figure 3, U.S. imports of textile and apparel products from 
all countries have grown significantly in the past decade, rising from 
about $44 billion in 1995 to about $83 billion in 2004.[Footnote 7] 
While other U.S. trade partners, such as Mexico, accounted for much of 
this growth in earlier years, imports from China grew rapidly following 
its accession to the WTO in 2001. As shown in figure 4, the value of 
U.S. textile and apparel imports from China grew from about $5 billion 
in 1995 to about $15 billion in 2004, with much of that growth 
occurring since 2001. While China's share of the U.S. textile and 
apparel market fell during the late 1990s, that country's share of the 
market increased from about 9 percent in 2000 to 18 percent in 2004. 
Much of that growth was in categories of products that were already 
removed from quota or were removed from quota in 2002. China is now the 
largest supplier of textile and apparel imports to the United States. 

Figure 3: U.S. Textile and Apparel Imports from All Countries, 1995- 
2004: 

[See PDF for image] 

[End of figure] 

Figure 4: U.S. Textile and Apparel Imports from China, 1995-2004: 

[See PDF for image] 

[End of figure] 

Import Growth No Longer Subject to Regulation by Quota: 

Until recently, the United States governed growth in textile imports 
through a system of quotas established through approximately 45 
bilateral agreements with individual supplier countries. In 1994, 
however, the United States (as well as Canada and the European Union, 
which also maintained broad-ranging quota arrangements) agreed in the 
WTO Agreement on Textiles and Clothing to remove these quota 
restrictions in a series of stages beginning on January 1, 1995, and 
ending with the removal of all remaining quotas on January 1, 
2005.[Footnote 8] Now textile and apparel trade is subject to the same 
WTO rules that apply to trade in other sectors.[Footnote 9]

China and the United States signed their first textile and apparel 
agreement in 1980. As China became a major exporter of textiles and 
apparel in the 1990s, these agreements came to be regarded as important 
means for restraining import growth and providing U.S. producers with 
an opportunity to adjust to trade liberalization in the textile and 
apparel sector. Upon China's accession to the WTO, the United States 
began removing quotas on Chinese textile and apparel products in 
accordance with the terms of the 1994 Agreement on Textiles and 
Clothing. Nonetheless, a majority of all imports from China remained 
subject to quota limits through January 1, 2005. The final step in 
quota removals ended quota restrictions on about 62 percent ($7 
billion) of U.S. textile and apparel imports from China. 

Interagency Committee Oversees Implementation of Textile Agreements: 

Congress has granted the President broad authority to regulate U.S. 
imports of textiles and apparel.[Footnote 10] By executive order, the 
President, in turn, established and delegated authority for 
implementing textile agreements to CITA--an interagency committee 
chaired by the Department of Commerce.[Footnote 11] Other CITA member 
agencies are the Departments of Labor, State, and the Treasury and the 
Office of the United States Trade Representative. Under the executive 
order, the committee chair takes action necessary to implement textile 
trade agreements after notifying the other CITA agencies, but if a 
majority of these agencies object within 10 days, the action may not be 
taken. While the end of the quota system has altered CITA's role, CITA 
continues to administer a number of U.S. textile and apparel import 
programs, such as quota arrangements with non-WTO members. 

China Textile Safeguard Permits Control over Surging Imports: 

The purpose of the China textile safeguard is to limit surging imports 
and foster the orderly development of trade in textiles and apparel 
from China. Safeguards are import restrictions, normally of limited 
duration and extent, that provide an opportunity for domestic 
industries to adjust to increasing imports. The China textile safeguard 
permits WTO members, including the United States, to temporarily 
restrict growth in specific imports from China even though textile and 
apparel quotas in general have been eliminated. The safeguard is 
transitional in nature in that it may be applied only through the end 
of 2008. CITA, an interagency group chaired by Commerce, has published 
procedures that explain the process it follows in considering safeguard 
action requests from the public. 

WTO China Textile Safeguard Permits Application of Quota Limits: 

China's WTO accession agreement contains a textile safeguard that 
allows WTO members, including the United States, to impose time-limited 
restrictions on the growth of specific textile and apparel imports from 
China. (See app. II for complete text). When a member finds that 
imports of specific textile and apparel products from China are "due to 
market disruption, threatening to impede the orderly development of 
trade" in such products, it may request consultations with China, and 
at the same time impose quota limits. When making such a request, the 
member is required to provide China with a detailed statement of 
reasons and justifications that demonstrates the existence or threat of 
market disruption and the role of Chinese imports in that disruption. 
Unless China and the importing country reach agreement on another 
satisfactory solution within 90 days, the quotas remain in place. 

The terms of China's accession agreement define the scope and duration 
of relief. In the absence of a bilateral agreement on some other 
solution, the importing member can generally limit growth in relevant 
Chinese imports to 7.5 percent above the level imported during the 
first 12 months of the previous 14-month period.[Footnote 12] The term 
of any quota begins on the date of the request for consultations with 
China and ends on December 31 of the same year. When 3 or fewer months 
remain in the year at the time of the request for consultations, the 
quota ends 12 months after the request date. No quota may remain in 
effect longer than 1 year without reapplication, unless the member and 
China agree otherwise. 

The China textile safeguard can only be applied through the end of 
2008. After that, WTO members concerned about the effects of rapidly 
increasing or unfairly traded Chinese-origin textile and apparel 
products will have to rely on other import relief mechanisms. Other WTO 
agreements (and U.S. law) provide a number of possible alternatives, 
including other safeguard mechanisms and antidumping duties. 

CITA Has Established Procedures for the Safeguard: 

In May 2003, CITA published procedures that explain to the public how 
it will consider safeguard action requests.[Footnote 13] These 
procedures inform producers of the information they must submit when 
requesting action, describe U.S. producers' standing to submit such 
requests, and establish time frames for processing requests and putting 
safeguard measures, if any are found appropriate, into place. 

CITA determined that these procedures fall outside the rule-making 
provisions that apply to most federal agencies under the Administrative 
Procedure Act because they pertain to foreign affairs. Therefore, CITA 
did not provide the public with an opportunity to comment on the 
procedures prior to issuing them.[Footnote 14]

Requesters Must Provide Import, Market Share, and U.S. Production Data: 

To obtain the information needed to determine whether a safeguard 
action is justified, CITA's procedures stipulate that those requesting 
such actions must submit (1) import and market share data from all 
foreign and domestic sources and from China in particular, (2) U.S. 
production data, and (3) additional information that shows how imports 
from China have adversely affected the domestic industry, such as their 
effect on prices in the United States "or any other data deemed 
pertinent." The import data "should demonstrate that imports of [the 
subject] Chinese origin textile and apparel product[s] . . . are 
increasing rapidly in absolute terms." 

The relevant language in China's WTO accession agreement neither 
defines "market disruption" or "orderly development of trade" nor 
establishes any criteria for making determinations on these matters. 
CITA's procedures also do not provide any specific criteria or 
benchmarks. CITA officials informed us that in considering whether 
safeguard action is warranted, they typically consider a wide range of 
factors to determine whether imports from China are playing a role in 
any actual market disruption or threat thereof. Those factors usually 
include the following: (1) all U.S. imports of the products in 
question, (2) the quantity of imports from China, (3) the extent to 
which imports of the product are increasing relative to other imports, 
(4) pricing and average unit values of U.S. imports from China relative 
to imports from the rest of the world, (5) the degree to which U.S. 
production is declining, and (6) trends in the share of the market held 
by imports from China and by the world. 

CITA Proceedings Designed to Take about 15 Weeks: 

The process for determining whether to impose a safeguard has three 
phases. First, CITA procedures provide 15 business days to review 
safeguard requests and determine whether the request provides the 
information necessary for consideration. Second, if CITA determines 
that the request provides the information required, it publishes in the 
Federal Register a notice seeking public comments within 30 calendar 
days. For example, U.S. importers opposing a safeguard can submit 
information that contradicts the requester's claims. Finally, CITA then 
has up to 60 calendar days after the close of the comment period to 
decide on the merits of a request.[Footnote 15] After any positive 
finding of market disruption or threat thereof, CITA requests 
consultations with China and, as set forth in China's WTO accession 
agreement, provides that country with a "detailed factual statement of 
reasons and justifications" that shows "the existence or threat of 
market disruption" and the role that Chinese products have played in 
that disruption. At the same time, CITA notifies the public via a 
Federal Register notice, and announces quotas on the subject imports 
from China. The quotas remain in place unless consultations between 
U.S. and Chinese officials yield an alternate agreement. As shown in 
figure 5, the entire process is designed to take up to about 15 weeks. 

Figure 5: CITA Timeline for Taking Action on Textile Safeguard 
Requests: 

[See PDF for image] 

[End of figure] 

Duration of Relief Depends on When Industry Files Case: 

Under CITA procedures, and as outlined in China's WTO accession 
agreement, import limits are effective from the date that the U.S. 
requests bilateral consultations to December 31 of the same calendar 
year. However, if 3 or fewer months remain in the year at the time of 
the request for consultations, the limit can be applied for one year 
from the consultation request date. Therefore, the length of time that 
safeguard measures remain in effect can vary by months, depending on 
when industry requests application and when CITA requests 
consultations. For example, if U.S. producers submit their request to 
CITA in mid-June, and CITA subsequently requests consultations in late 
September, safeguard measures can only remain in effect for a little 
over 3 months (that is, until the end of the calendar year in 
question). However, if producers wait until mid-July to submit their 
request, such that CITA initiates consultations with China in October, 
measures imposed may remain in effect until the following October--or 
for 12 months. 

CITA procedures allow producer groups to request reapplication of 
safeguard measures. However, the procedures specify that CITA will 
reapply safeguards only in the event of a new determination that 
Chinese imports are, due to market disruption, threatening to impede 
the orderly development of trade.[Footnote 16] The timeline for 
processing reapplication requests is the same as for initial safeguard 
requests. 

CITA Procedures Grant Standing to Producers of Finished Goods and 
Components: 

CITA procedures give broad standing to producers of both finished goods 
(e.g., garments) and components (e.g., fabric) to submit requests for 
safeguard actions. Requests may be filed by an entity that represents 
either (1) domestic producers of a product "like or directly 
competitive with" the Chinese textile or apparel product or (2) 
domestic producers of a component used in such a product. CITA 
officials explained that component producers have long had standing to 
request imposition of quota restrictions on textile and apparel 
products. CITA officials explained that although component producers 
may request safeguard actions, the data they submit in support of their 
request must address the subject Chinese imports. Entities eligible to 
file a request include trade associations, firms, and certified or 
recognized unions or groups of workers in relevant industries. CITA 
itself may also initiate a safeguard action. 

Over the last two decades, U.S. producers of apparel have come to rely 
heavily on outward processing arrangements. In such arrangements, U.S. 
factories focus on the relatively capital-intensive operations, such as 
fabric production. These fabrics and components are then shipped to 
Caribbean, Andean, or African countries that participate in certain 
U.S. trade preference programs.[Footnote 17] Factories in these 
countries conduct the relatively labor-intensive business of assembling 
the fabric and other components into finished garments. 

CITA Has Applied Market-Disruption-Based Safeguards but Threat-Based 
Requests Remain Unresolved: 

During 2003 and 2004, CITA applied safeguard measures on four Chinese- 
origin products that had previously been freed from quota limits, based 
on evidence of both actual market disruption and the threat of 
continued market disruption. As shown in figure 6, these products 
accounted for about 7 percent of U.S. imports of textile and apparel 
products from China.[Footnote 18] More recently, producers groups have 
filed threat-based requests for safeguard action on a number of 
products, alleging that there would be disruptive import surges once 
quotas on those products expired on January 1, 2005. The main 
difference between the market-disruption-based requests and threat- 
based requests is that the market-disruption-based requests allege that 
market disruption has occurred and that Chinese imports have played a 
role in that disruption, whereas the threat-based requests allege that 
market disruption will occur in the future and that Chinese imports 
will play a role in that disruption. Figure 6 shows that these threat- 
based requests account for an additional 11 percent of U.S. imports of 
textile and apparel products from China.[Footnote 19] These requests 
remain unresolved pending resolution of a lawsuit, filed by U.S. 
importers, that opposes CITA's processing of threat-based requests. 

Figure 6: Share of U.S. Imports from China Subject to Safeguards or 
Requests: 

[See PDF for image] 

Note: Share of approximately $12 billion in U.S. imports of textile and 
apparel products from China is based on 2003 import statistics. Shares 
do not equal 100 percent due to rounding. 

[End of figure] 

Safeguards Applied in Four of Five Market-Disruption-Based Requests: 

U.S. producer groups requested that CITA impose safeguards on imports 
of knit fabric, brassieres, robes and dressing gowns, and gloves from 
China in July 2003, and in June 2004 they requested safeguards on socks 
from China as well.[Footnote 20] Almost all of these products had been 
removed from quota protection well in advance of the requests for 
relief--either when China joined the WTO in December 2001 or shortly 
thereafter in January of 2002. 

In four out of these five cases, CITA imposed 7.5 percent growth limits 
on relevant imports from China, as provided in China's WTO accession 
agreement, and these limits remained in place when U.S.-China 
consultations failed to produce agreement on any alternate solution. In 
each case, CITA determined that U.S. markets for the products in 
question had been disrupted and that imports from China had played a 
significant role in this disruption. In each case, CITA also 
determined, based on a number of factors, that the subject Chinese 
imports posed a threat of further market disruption in the future. 
First, CITA found that China had a significant capacity to export 
textile and apparel products. Second, CITA found that the prices of 
textile and apparel products from China were lower than the average 
prices from other supplier countries. Third, CITA noted that since the 
U.S. removed quotas on these products, trends in prices, production, 
and imports had changed markedly. Consequently, CITA determined that 
without action, the trends would continue. CITA also considered the 
imports of the subject products to be increasing dramatically. Finally, 
CITA noted significant Chinese investment in its textile and apparel 
industry. See appendix III for more detail on each of the four CITA 
determinations. 

CITA refused to consider the fifth case--a July 2003 market-disruption- 
based request concerning knit and woven, cotton and man-made fiber 
gloves--because (1) woven gloves were still subject to product-specific 
quotas under the Agreement on Textiles and Clothing[Footnote 21] and 
therefore would already be subject to limits during the period of 
safeguard relief, and (2) the production data provided by the requester 
were from 2001, and 2002 data were to be released shortly. As of March 
2005, however, U.S. producers have not filed an updated request. 

Threat-Based Requests Remain Unresolved: 

In the last three months of 2004, U.S. producer groups filed 12 threat- 
based requests. Nine of the threat-based requests focused on products 
that would be removed from quota restrictions on January 1, 2005. These 
included cotton trousers, man-made fiber knit shirts/blouses, cotton 
knit shirts/blouses, man-made fiber trousers, man-made fiber shirts 
(not knit), and man-made fiber underwear. The remaining three requested 
reapplication of safeguard restrictions on knit fabric, brassieres, and 
dressing gowns on the grounds that disruptive imports of these products 
would resume when previously imposed restrictions ceased to apply in 
December 2004. 

CITA agreed to consider these 12 threat-based requests, but has not yet 
completed action on them.[Footnote 22] CITA had been scheduled to 
decide upon all of them between February and March 2005. However, as a 
result of a December 30, 2004, court-ordered injunction (described 
below) granted in response to a motion by importers, CITA is not 
permitted to process threat-based requests until judicial review of its 
authority to impose safeguards in such cases has been completed. 
Therefore, these cases remain unresolved. 

Procedural Shortcomings Have Impaired Application of China Textile 
Safeguard: 

Although CITA has completed action on several textile safeguard 
requests and U.S. producers have received relief, procedural 
shortcomings have impaired use of the safeguard. First, we found that 
CITA was slow in issuing its procedures and a lack of clarity in those 
procedures created uncertainty about when, how, and under what 
circumstances CITA would consider threat-based requests and that this 
uncertainty resulted, and continues to result, in decisions being 
delayed while imports from China increase. Second, we found that the 
lack of production data on some textile and apparel products--data that 
is necessary to fulfill CITA filing requirements--has inhibited equal 
access to the safeguard. Beyond these issues, uncertainty about future 
developments in global textile trade makes the future impact of the 
China textile safeguard unclear. 

Procedural Shortcomings Created Uncertainty: 

U.S. producers considering requests for safeguard action and U.S. 
importers of textiles and apparel that might oppose such safeguards 
have faced uncertainty because CITA was slow in issuing procedures and 
a lack of clarity in those procedures. A significant period of time 
elapsed before CITA issued procedures for the China textile safeguard, 
substantially delaying action on the initial market-disruption-based 
requests. Once issued, CITA's procedures were unclear about whether or 
how it would proceed on threat-based requests. The uncertainty 
surrounding threat-based cases has resulted in a court-ordered 
injunction preventing action on these requests and created additional 
delays--both for those interested in seeking safeguard actions and 
those seeking a clear determination that such actions should not be 
taken. 

CITA Slow to Issue Procedures: 

CITA issued procedures about the textile safeguard contained in China's 
WTO accession agreement approximately 17 months after China joined the 
organization. Until these procedures were issued, it was not clear 
when, how, or under what circumstances CITA would consider safeguard 
action requests from the public. 

China's WTO accession agreement, which became effective December 11, 
2001, outlined some aspects of the safeguard mechanism, but did not 
fully explain what or how much information national authorities should 
consider in deciding whether to apply safeguards. Member governments 
were left to clarify such matters.[Footnote 23] Even though CITA had 
not yet provided any guidance, in September 2002 U.S. trade 
associations representing textile manufacturers requested application 
of safeguards against Chinese knit fabric, gloves, dressing gowns, 
brassieres, and luggage. CITA did not act on these requests. 

In May 2003 CITA issued procedures describing the information that it 
would require in order to consider safeguard requests. U.S. producers 
of knit fabric, gloves, dressing gowns, and brassieres subsequently 
refiled their requests,[Footnote 24] and CITA applied safeguards on 
these products (except gloves) in December 2003--15 months after these 
industry groups had originally requested action. Imports of some of 
these products grew significantly during the intervening months. Figure 
7, for example, shows that imports of Chinese-origin brassieres 
increased by about half between the first and second industry filings. 

Figure 7: Monthly Brassiere Imports from China, January 1999 to 
December 2004: 

[See PDF for image] 

[End of figure] 

Commerce officials pointed out that the procedures issued for the China 
textile safeguard marked the first occasion that CITA had published 
guidance on how it would consider requests for new quota restraints. 
They noted that because CITA had not had this level of transparency in 
the past when administering the wide-ranging U.S. textile quota system, 
the procedures took longer than might be expected to prepare. 
Additionally, CITA officials indicated that the procedure of soliciting 
comments prior to requesting consultations and imposing limits was also 
unprecedented. Previously, CITA put out notices for public comment only 
after delivering a request for consultations to establish a quota. 

Procedures Unclear on Threat-Based Requests for Safeguard Action: 

CITA's China textile safeguard procedures are not clear on how it will 
proceed in threat-based cases. CITA officials told us that the 
procedures utilize the WTO language through which members can request 
consultations on the existence as well as threat of market disruption. 
However, the procedures focus on market-disruption-based requests. For 
example, they state that a request will only be considered if it 
includes specific information set forth in support of a claim of market 
disruption. Similarly, the procedures state that reapplication will 
only take place if CITA makes a new affirmative market disruption 
determination. They also specify that the import data submitted with a 
request "should demonstrate that imports of Chinese-origin textile and 
apparel products that are like or directly competitive with the product 
produced by the domestic industry concerned are increasing rapidly in 
absolute terms." 

By their nature, threat-based cases will not rely on information 
claiming that market disruption has already taken place, but rather 
will focus on prospects for future market disruption. This was 
demonstrated in the requests filed by U.S. producers in the fall of 
2004. Although import data demonstrating that a rapid increase has 
already occurred have been important in CITA's determinations in market-
disruption-based requests, they would not be expected to be as 
important for threat-based requests. In fact, a majority of the threat- 
based requests made in late 2004 asserted that imports were unlikely to 
increase rapidly until 2005 because these products had, until recently, 
been subject to quotas that made substantial import increases 
improbable.[Footnote 25]

In the absence of formal guidance, U.S. producers requesting threat- 
based actions submitted information on such matters as China's 
productive capacity, performance in other apparel categories already 
removed from quota, price behavior of products removed from quota, and 
information about alleged unfair trade practices in China. CITA's 
procedures do not specifically call for any of these types of 
information, but requesters are allowed to submit other information 
deemed pertinent. 

CITA Officials Accepted Threat-Based Requests and Announced Indicative 
Factors: 

CITA officials emphasized that China's accession agreement provides for 
taking safeguard actions on the basis of threat. These officials 
further explained to us that their procedures do not preclude U.S. 
producers from requesting safeguard action solely on the basis of 
threatened market disruption. Therefore, even if U.S. procedures do not 
focus on threat, CITA may still consider requests on that 
basis.[Footnote 26] Finally, administration officials maintained that 
they were under no obligation to issue procedures and can independently 
consider safeguard measures based upon the government's best 
information and judgment. 

Although CITA's procedures do not clearly describe the information that 
requesters should submit in support of threat-based requests, Commerce 
officials observed that the Federal Register notices requesting public 
comment on threat-based requests have indicated the types of 
information that CITA would take into consideration in determining 
whether safeguard actions should be applied. These notices requested 
that interested parties submit information as to: 

* whether Chinese imports are entering the market at prices 
substantially below the prices of the equivalent U.S. product and 
whether the Chinese imports will likely depress prices of the U.S. 
product;

* whether Chinese imports are likely to rise due to increasing 
production capacity in China;

* whether there will be an imminent diversion of Chinese-origin 
products and other third markets to the United States;

* changes in inventory levels of the Chinese-origin products in 
question;

* the extent to which conditions in the domestic industry demonstrate 
that market disruption is likely (e.g., factory closures or production 
declines); and: 

* whether U.S. managers, retailers, purchasers, importers, or other 
market participants have recognized Chinese producers as potential 
suppliers. 

CITA officials noted that these factors are indicative but not 
necessarily determinative. Moreover, they have not been integrated into 
their official procedures. 

Some U.S. Importers and Producers Experienced Uncertainty about Threat- 
Based Requests: 

In July 2004, a number of producers and producer associations observed 
that CITA had thus far refused to consider threat-based requests for 
safeguard action even though, in the associations' view, WTO rules 
allowed consideration of such requests. One industry representative at 
the time stated: "Specifically, the U.S. textile industry has asked the 
administration to recognize that China poses a severe threat to the 
domestic textile industry and to use appropriate safeguard actions, as 
allowed under WTO rules. To date, the administration has refused to 
consider safeguard actions before the actual occurrence of damage in 
the marketplace." In concert with other organizations, the same 
industry association subsequently filed a number of threat-based 
requests for safeguard action in early October 2004. 

In opposing CITA's decision to accept these requests and initiate 
investigations as to whether safeguards should be applied, one 
association representing importers argued that the administration had 
changed its position on threat-based requests. The importers contended 
that administration officials had informally indicated to them that the 
safeguard was intended for market-disruption-based requests as opposed 
to threat-based requests. In addition, the association observed that 
when CITA decided to consider threat-based requests, it did not modify 
its procedures or make a formal announcement to reflect the change in 
its position. 

Court Suspends CITA Consideration of Threat-Based Requests: 

Uncertainty over threat-based cases and the disagreement that ensued 
between U.S. textile importers and the administration led to a court 
order that CITA may not consider threat-based requests, pending further 
judicial review. At this point, it is not clear when the court will 
render a final decision. 

The case began on December 1, 2004, when the U.S. Association of 
Importers of Textiles and Apparel filed a complaint and motion for a 
preliminary injunction before the U.S. Court of International Trade 
requesting that the court enjoin CITA from considering threat-based 
requests.[Footnote 27] In support, the Association argued, among other 
things, that CITA had (1) violated its own procedures and the 
Administrative Procedure Act[Footnote 28] by deciding to consider 
threat-based petitions and (2) exceeded its authority in taking any 
action under the China Textile safeguard because Congress had not 
authorized CITA to do so.[Footnote 29]

In its response, the administration argued that CITA was not obligated 
to promulgate regulations implementing the textile safeguard and that, 
in any event, CITA acted within its authority in considering threat- 
based requests.[Footnote 30] In this regard, the administration 
maintained that CITA had clarified its procedures regarding threat- 
based requests through individual case proceedings.[Footnote 31] 
Furthermore, CITA officials asserted that they never had a policy of 
categorically denying threat-based requests. 

On December 30, 2004, the court granted the association's motion for a 
preliminary injunction and enjoined CITA from taking any further action 
on China textile safeguard actions based on threat of market disruption 
during the court proceedings on the case.[Footnote 32] In enjoining 
CITA from further considering threat-based requests, the court found 
that CITA officials made statements to various trade publications 
between July and August 2004 indicating that the safeguard was intended 
for cases of actual market disruption--rather than threat of market 
disruption. On Feb. 14, 2005, the administration appealed the Court of 
International Trade's granting of a preliminary injunction to the 
United States Court of Appeals for the Federal Circuit.[Footnote 33] 
Thus, at this point, it is unclear when there will be a final 
determination on whether CITA can properly hear threat- based requests. 

Delays Impact Timing and Level of Relief: 

Lengthy legal action against CITA or a court decision that CITA may 
only process cases that present evidence of actual market disruption 
will postpone determinations on whether to apply safeguard measures and 
may result in imposition of quota limits that remain in place for 
shorter periods of time and are less restrictive of Chinese imports. 

Because of the wording in China's WTO accession agreement, decision- 
making delays on the pending requests for application of threat-based 
safeguards may shorten the duration of any measures imposed. Prior to 
the court issuing its preliminary injunction, CITA had been scheduled 
to decide whether to take action on the threat based requests submitted 
in October 2004 by early February 2005. As shown in figure 8, had CITA 
decided in favor of safeguard actions in accord with its original 
timetable, quota limitations on cotton trousers, for example, would 
have been in place for 11 months (from February 1 through the end of 
2005). In the event of a court ruling in its favor, CITA may yet impose 
threat-based safeguards. However, as provided in China's WTO accession 
agreement, any safeguard measure imposed prior to October 1 of a given 
year will expire at the end of that year. Through September, therefore, 
each month of delay means that any safeguard measures imposed will 
remain in place for a correspondingly shorter period of time. For 
example, measures imposed at the end of April would remain in effect 
for 8 months. 

Figure 8: Comparison of Timelines for Actual Threat-Based Request with 
Possible Market-Disruption-Based Request: 

[See PDF for image] 

[End of figure] 

Lengthy delays or a court ruling against CITA may result in U.S. 
producers choosing (or being required) to file new requests based only 
on actual market disruption. As shown in figure 8, any relief they 
receive would come at a significantly later date than would have 
resulted from their original threat-based requests. Since supporting 
import data in a market-disruption-based case should demonstrate a 
rapid increase in imports from China, any petitioner requesting relief 
based on actual market disruption on a product removed from quota on 
January 1, 2005 would likely have to wait until at least mid-March to 
file a request.[Footnote 34] The reason is that they will probably need 
at least one month's import data after the quota expires to demonstrate 
an increase in imports that is leading to actual disruption in the U.S. 
market. In addition, it takes about 6 weeks for the federal government 
to make import data publicly available so that domestic producers may 
include it in their requests.[Footnote 35] Given CITA's 3-month 
decision-making timeline, U.S. producers could not expect a decision on 
a case filed in mid-March until around July 2005. In this scenario, 
U.S. producers would receive about 6 months of relief. 

Alternatively, domestic producers could wait until midyear to file a 
market-disruption-based request. As shown in figure 8, an affirmative 
determination would then result in a year of relief. However, a 
decision to postpone filing is likely to result in less effective 
relief for the domestic producer. As already noted, China's WTO 
accession agreement provides that quota restrictions will be calculated 
based on the import levels recorded during the first 12 months of the 
14-month period leading up to the quota action being taken. In an 
environment of rapidly rising imports, the longer an organization waits 
to file a request, the higher import levels grow and the higher 
subsequently imposed quota limits become. 

Unavailability of Production Data Hinders Access to the Safeguard: 

Equal access to the China Textile Safeguard is impaired by the lack of 
publicly available U.S. production data on some textile and apparel 
products. As mentioned earlier, CITA requires that safeguard action 
requests include import, market share and U.S. production data. CITA 
officials review production data (for example, the amount of knit 
fabric produced in the United States) to determine the nature and 
extent of disruption in the U.S. market. According to CITA procedures, 
if production data are not available from government sources, those 
requesting safeguard actions must provide the data themselves, along 
with a complete list of all sources from which the data were obtained. 
The submission must include an affirmation that, to the best of the 
requester's knowledge, the data represent substantially all of the 
domestic production of like or directly competitive products. 

The Bureau of the Census collects and publishes production data for 
many textile and apparel products. The Census Bureau surveys U.S. 
industry to obtain production information as part of the bureau's 
Current Industrial Reports program. Census officials send 
questionnaires to manufacturers on a monthly, quarterly, or annual 
basis, depending on the product. The purpose of the bureau's program is 
to provide data on production and shipments of certain products for use 
by both government and the private sector. 

Commerce's Office of Textiles and Apparel (OTEXA) takes the production 
data, converts it, and publishes it in category form in order to 
compare it with trade data.[Footnote 36] The purpose of the category 
system is to allow the United States to implement quotas under 
international textile agreements by grouping products in directly 
competitive Harmonized Tariff Schedule headings together into single 
categories. For example, bow ties and other types of ties enter the 
United States under different tariff headings, but for quota management 
purposes, data on all types of ties are added together to form one 
"neckwear" category. 

Since the two classification systems were developed for different 
purposes, Census production categories and CITA import categories 
differ to varying degrees. Because OTEXA is not able to match Census 
production data to all of CITA's categories, the availability of 
production data for safeguard investigations can be affected. In 
addition, because of the small number of producers in some industries, 
data are collected but not released publicly because they would 
disclose private business information.[Footnote 37] In total, U.S. 
production data are not available for 32 of 167 textile and apparel 
categories.[Footnote 38] OTEXA and Census officials provided the 
following accounting of why data are not available in these categories: 

* For 9 categories, Census does not collect production data. OTEXA 
believes many of these the categories are composed of products for 
which there is little or no domestic production. For 3 sock categories, 
Census did not start surveying the industry until the end of 2004. 
Also, in 1 category (nonwoven fabric), OTEXA believes the industry is 
large, but not import sensitive. 

* For 11 categories, Census may collect some data, but Census 
production descriptions do not match CITA categories. For example, CITA 
maintains a category called "other man-made fiber apparel," which 
includes a range of products from swimwear to shawls. Census collects 
data for some, but not all, of the products in this category. 

* For 12 categories, Census does collect domestic production data, but 
the data cannot be published to avoid disclosure of individual company 
information. Suppression across these 12 categories affects 
approximately 100 establishments, or about 1 percent of the total 
number of textile and apparel establishments from which Census collects 
data.[Footnote 39]

The unavailability of production data might disadvantage an unknown 
number of U.S. producers facing market disruption. We found that most 
(25 of 32) Chinese-origin imports in categories for which there are no 
publicly available production data have increased both in absolute 
terms and in relation to imports from other countries. This suggests 
that U.S. producers of these products face increased competition from 
Chinese imports, and thus may be more likely to seek safeguard action. 
In its past decisions to impose safeguards, CITA has cited relative and 
absolute Chinese import increases as factors in its market disruption 
determinations. Additionally, in some categories recently removed from 
quota, such as "other man-made fiber apparel," the Chinese producers 
largely filled their quota in the past several years. In its recent 
threat-based requests, the domestic industry cited import increases and 
high quota fill rates as evidence that Chinese imports will increase 
significantly upon removal of the quotas. 

Table 1 provides a summary of import trends in categories for which 
production data are unavailable. (See app. IV for detailed information 
on each product category.) About half of the total value of textile and 
apparel imports from China (48 percent) fell into product categories 
for which data on U.S. production are unavailable.[Footnote 40] 
Furthermore, for imports from China removed from quota on January 1, 
2005, about half also fell into product categories in which data on 
U.S. production are unavailable. 

Table 1: Summary of Import Data for Product Categories for Which U.S. 
Production Data Are Unavailable: 

Textile and apparel: Products removed from quota prior to January 1, 
2005, or never under quota; 
Number of categories: 15; 
Imports from China, 1995: $556,780; 
Imports from China, 2004: $2,761,488; 
China's share of total U.S. imports, 2004 (percent): 42%; 
Average annual change, imports from China, 2001-2004 (percent): 50%. 

Textile and apparel: Products removed from quota January 1, 2005; 
Number of categories: 14; 
Imports from China, 1995: $790,702; 
Imports from China, 2004: $4,479,622; 
China's share of total U.S. imports, 2004 (percent): 41%; 
Average annual change, imports from China, 2001-2004 (percent): 60%. 

Textile and apparel: Products currently subject to safeguards measures 
(socks); 
Number of categories: 3; 
Imports from China, 1995: $1,737; 
Imports from China, 2004: $228,298; 
China's share of total U.S. imports, 2004 (percent): 21%; 
Average annual change, imports from China, 2001-2004 (percent): 197%. 

Total (all products without production data); 
Number of categories: 32; 
Imports from China, 1995: $1,349,219; 
Imports from China, 2004: $7,469,408; 
China's share of total U.S. imports, 2004 (percent): 40%; 
Average annual change, imports from China, 2001-2004 (percent): 57%. 

Source: GAO analysis of Department of Commerce data. 

Note: Imports in thousands constant 2004 dollars. 

[End of table]

Sock Case Illustrates Data Collection Difficulties: 

The experience of U.S. sock producers in preparing their market- 
disruption-based request illustrates the difficulties that can result 
from production data not being available. Since the Census Bureau did 
not, until recently, collect production data on cotton, wool, or man- 
made fiber socks, the U.S. producers that filed this request needed to 
collect the data themselves. The requesters proceeded to survey the 
domestic industry to obtain the required data. However, according to a 
textile industry representative, some members of the industry did not 
cooperate with the survey because they did not support the request. 
This made it difficult for the requesters to collect the information 
needed to meet CITA's requirement for data covering "substantially all" 
domestic production. One industry representative said that collecting 
the production data was "a very difficult and time-consuming exercise." 
One of the producer associations requesting the safeguard said it had 
to delay submission of a request for 10 months while they gathered the 
relevant data. As shown in figure 9, sock imports from China rose 
substantially during this delay.[Footnote 41]

Figure 9: Sock Imports from China, January 1999 to December 2004: 

[See PDF for image] 

[End of figure] 

Safeguard's Future Impact Unclear: 

Uncertainty about future patterns in the global textile and apparel 
trade and the applicability of other U.S. import relief mechanisms make 
the future impact of the China textile safeguard unclear. It is unclear 
to what extent safeguards imposed on China will provide relief to the 
U.S. industry--or will instead increase the market share obtained by 
other foreign producers. As shown in figure 10, U.S. textile and 
apparel imports from producers such as India, Pakistan, and especially 
Vietnam have also increased over the past decade, and the China textile 
safeguard cannot be applied to non-Chinese imports. While China is 
widely expected to become a more dominant force in global textile and 
apparel markets, it is too early to predict how other major producing 
countries will fare in the postquota environment.[Footnote 42] Other 
WTO members have expressed concern about changing trade patterns 
resulting from the termination of the quota limits. These members note 
that, while some studies suggest overall benefits from the 
liberalization of textile and apparel trade, certain developing 
countries will face difficult adjustment costs. 

Figure 10: U.S. Imports of Textile and Apparel from India, Pakistan, 
and Vietnam, 1995-2004: 

[See PDF for image] 

[End of figure] 

The Chinese government's recent announcement that it will impose export 
taxes on a range of textile and apparel products to ensure a smooth 
transition from the end of the quota system further clouds future 
developments in U.S. textile trade. The Chinese government has 
indicated that these taxes are intended to encourage the export of 
higher-value-added products while discouraging export surges. The 
impact of these taxes remains to be seen. 

Other import relief mechanisms available under the terms of China's WTO 
accession agreement and U.S. law may or may not prove useful for U.S. 
textile and apparel producers. The "product-specific" safeguard 
established under the accession agreement may in theory be applied to 
textile and apparel imports from China through the end of 
2013.[Footnote 43]However, no one has yet made such a request. Other 
import relief mechanisms available under U.S. law--such as noncountry 
and nonsector-specific safeguard measures and antidumping duties-- 
might be used to deal with imports from China and other WTO members. 
However, to our knowledge these remedies have not been applied in the 
textile and apparel industry recently, and thus it is difficult to 
predict how effective they might prove. 

It is also possible that a portion of the textile industry will not 
have recourse to any U.S. trade remedies after the China textile 
safeguard expires on December 31, 2008. Two industry representatives 
told us they had concerns about their eligibility to use other trade 
remedies. CITA procedures explicitly give standing to U.S. component 
producers to request application of the China textile safeguard against 
imports of finished products. However, the industry representatives 
observed that the laws and regulations governing antidumping and other 
import relief mechanisms have standing requirements that may preclude 
component producers from requesting relief through these other 
mechanisms. Thus, U.S. government agencies may determine that component 
manufacturers do not have standing because their component is not "like 
or directly competitive to" the subject Chinese import. 

Conclusions: 

The China textile safeguard provides a mechanism for limiting growth in 
imports from that country in certain circumstances--thus helping to 
avoid market disruption and facilitate orderly adjustment to China's 
growth as a source of textile and apparel products. The four requests 
that the United States has decided upon thus far have demonstrated that 
once removed from quota restrictions, imports from China can rise 
rapidly and significantly disrupt U.S. markets. The termination of all 
remaining quotas on Chinese imports at the beginning of this year may 
bring additional import surges and associated disruption in U.S. 
markets. 

Procedural shortcomings have impaired effective application of the 
China safeguard, leading to, among other things, uncertainty and delay 
that may weaken safeguard actions on some products that were recently 
released from quota restrictions. Similarly, lack of production data 
impaired access to safeguard measures for U.S. sock producers, and may 
pose similar problems should other producers in similar circumstances 
seek application of this mechanism. 

The extent to which vigorous application of the China-specific textile 
safeguard will assist U.S. producers--or create opportunities for other 
exporting nations--is unknown, and in any case, the safeguard is only 
available through the end of 2008. Nonetheless, China is expected to 
continue to be a major source of U.S. textile and apparel imports, and 
the usefulness of alternative U.S. import relief mechanisms remains 
untested by textile and apparel producers. Since the safeguard was an 
integral part of the framework that led to Congress approving permanent 
normal trade relations with China and cleared the way for that country 
to join the WTO, it is important that CITA and the Department of 
Commerce take action to enhance the procedures employed in applying 
this mechanism while it remains available. 

Recommendations for Executive Action: 

In the event that the courts rule that CITA may process threat-based 
requests for China textile safeguards, we recommend that CITA amend its 
procedures to clarify how it will proceed in threat-based cases, 
including the information that producers should submit in such cases. 

To enhance access to safeguard relief for all segments of the textile 
and apparel industry that may face import surges, we recommend that the 
Department of Commerce, as CITA's chair, review the products and 
categories for which U.S. Bureau of the Census production data are 
unavailable and, with public input, conduct a risk assessment aimed at 
identifying industry sectors at high risk of experiencing import surges 
from China and associated market disruption. We further recommend that 
on the basis of the risk assessment, Commerce's Office of Textiles and 
Apparel work with the Census Bureau to explore options to make 
production data concerning these industry sectors available for 
safeguard requests. We realize that in some instances it might not be 
feasible to make such data publicly available due to disclosure 
limitations and that data (or analysis of trends in that data) possibly 
may need to be limited to CITA. 

Agency Comments and Our Evaluation: 

We provided draft copies of this report to the Department of Commerce, 
in its capacity as chair of the interagency Committee for the 
Implementation of Textile Agreements. The Department of Commerce 
collected and compiled comments from the CITA member agencies into one 
letter, which, with our responses, are reproduced in appendix VI. CITA 
also provided technical comments that we incorporated, as appropriate. 
We also incorporated technical comments from the Bureau of the Census 
and the United States International Trade Commission. 

With respect to our first recommendation, CITA noted that our review 
focused on issues involved in the ongoing litigation and, per a 
Department of Justice request, CITA could not comment on certain parts 
of the report. Nevertheless, CITA expressed concern about how we 
described the timing of issuance and content of CITA procedures as they 
relate to threat-based requests. CITA also expressed concern that some 
of our conclusions in the report seemed to be premised on the arguments 
of private parties in ongoing litigation. Our report does not take any 
position on the legal issues that are the subject of the ongoing 
litigation between the U.S. Association of Importers of Textiles and 
Apparel and the United States, including whether CITA's procedures 
allow for threat-based cases. However, we continue to believe the 
procedures could be improved in this regard to further increase clarity 
and transparency. With respect to the timing issue, we acknowledge the 
significant steps CITA has taken to increase the transparency of its 
investigations. Nevertheless, a significant amount of time elapsed 
prior to CITA's issuing procedures, and concerned groups had to refile 
several safeguard action requests. We reviewed the submissions of the 
parties and described some of their main points. However, we drew our 
conclusions from our analysis and evidence that we collected. We 
maintain that our findings about the public's uncertainty at the time 
represent a balanced summation of the facts. 

In responding to our second recommendation, Commerce made three points. 
First, the agency observed that there are several reasons why 
production data might not be available, including the need to protect 
the confidentiality of individual producers. Second, it stated that 
there are few, if any, domestic entities from industries for which 
Census data were not published that would likely request safeguard 
action. Third, it noted that any domestic entity that did request a 
safeguard would be able to collect its own data and that Commerce and 
CITA stand ready to provide advice as to how the data requirements 
could be met. 

We revised our report to make clear that there are a number of reasons 
why production data are not published and that it may not be proper, in 
some situations, to make the data available to the public. We agree 
that the universe of producers that may be adversely affected by a lack 
of production data may be small. However, we found that collecting the 
information needed to meet CITA's production data requirement can be a 
time-consuming process that impedes safeguard access relative to 
industry sectors where the data is readily available from government 
sources. Given that the textile and apparel industry is undergoing 
rapid change, new industry sectors not previously viewed as vulnerable 
to Chinese competition may seek relief and would need data. 

We are sending copies of this report to the heads of CITA member 
agencies (the Departments of Commerce, Labor, State, and the Treasury 
and the Office of the United States Trade Representative), appropriate 
congressional committees, and other interested parties. In addition, 
the report will be available at no charge on GAO's Web site at 
[Hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-4347 or [Hyperlink, yagerl@gao.gov]. Other GAO 
contacts and staff acknowledgments are listed in appendix VII. 

Signed by: 

Loren Yager: 
Director, International Affairs and Trade: 

[End of section]

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

In May 2003, the House Appropriations Committee's Subcommittee on 
Commerce, Justice, and State, the Judiciary, and Related Agencies held 
hearings regarding U.S. government efforts to support American 
businesses adversely affected by imports from China. In light of 
concerns expressed at this hearing, the House-Senate conference report 
on fiscal year 2004 appropriations legislation requested that GAO 
monitor the efforts of U.S. government agencies responsible for 
ensuring free and fair trade with China. In subsequent discussions with 
your staff, we agreed to respond by providing a number of reports on 
relief mechanisms available to U.S. producers that are adversely 
affected by unfair or surging imports, and the manner in which the 
mechanisms have been applied to China.[Footnote 44] In this report, we 
(1) describe the China textile safeguard, (2) describe the requests for 
safeguard action filed by domestic industry and the results of these 
requests, and (3) evaluate agency procedures for transparency and 
accessibility and identify additional issues that may affect 
application of safeguard measures in the future. 

To address our first objective, we reviewed U.S. laws and procedures as 
well as relevant World Trade Organization (WTO) agreements and China's 
WTO accession agreement. To ensure our understanding of relevant laws, 
procedures, and agreements, we spoke with officials from the five 
member agencies of the U.S. government's Committee for the 
Implementation of Textile Agreements (CITA). The members of CITA are 
the Departments of Commerce, Labor, State, and the Treasury, and the 
United States Trade Representative. In addition, we interviewed 
officials with the World Trade Organization and private sector experts 
on trade law. 

To address our second and third objectives, we reviewed and analyzed 
each of the Statements of Reasons and Justifications that CITA has 
issued to explain its determinations on safeguard actions completed as 
of December 2004. We also reviewed the information that CITA received 
in response to its request for public comment on each of these 
requests. To clarify the views of parties in favor of applying 
safeguard measures, we spoke with representatives of the three domestic 
industry trade associations that have participated in filing every 
safeguard action request to date. To clarify views of parties opposed 
to such measures, we spoke with a trade association representing over 
200 importers of textiles and apparel and a trade association 
representing 50 state retail associations and 20 national retail 
organizations as well as national and independent retailers, and also 
attended an international conference of textile and apparel importers. 
We also spoke with Chinese government officials. To obtain a broader 
perspective on global textile trade and the application of the 
safeguard in a postquota environment, we spoke with representatives of 
additional textile and apparel exporting and importing countries. 
Finally, we reviewed the order of the U.S. Court of International Trade 
granting a preliminary injunction to the U.S. Association of Importers 
of Textiles and Apparel precluding CITA from acting on threat-based 
requests for safeguard action,[Footnote 45] as well as other relevant 
documents filed by the parties involved in this case. 

In support of these objectives, we also conducted analyses of textile 
and apparel import data, as well as U.S. domestic production and 
employment data for textile and apparel sectors. U.S. import data are 
official statistics from the Bureau of the Census, Department of 
Commerce. We adjusted the import data for inflation by using the 
textile and apparel products import price deflators from the Bureau of 
Labor Statistics. Inflation-adjusted values are in constant 2004 
dollars and are identified throughout the report. U.S. production 
(shipment) values are from the Census Bureau's Manufacturing, Mining, 
and Construction Statistics. In order to present values in 2004 
dollars, we used the 2004 value of shipments from Census for each 
industry and extrapolated prior year shipments using the Federal 
Reserve Board's Industrial Production Index for the particular 
industries. U.S. employment data are official statistics from the 
Bureau of Labor Statistics, Department of Labor. We assessed these data 
and found them to be sufficiently reliable for the purposes of this 
report. 

We performed our work from January 2004 to January 2005 in accordance 
with generally accepted government auditing standards. 

[End of section]

Appendix II: Paragraph 242 of the Working Party Report on China's 
Accession to the WTO: 

The representative of China agreed that the following provisions would 
apply to trade in textiles and clothing products until 31 December 2008 
and be part of the terms and conditions for China's accession: 

(a) In the event that a WTO Member believed that imports of Chinese 
origin textiles and apparel products covered by the ATC as of the date 
the WTO Agreement entered into force, were, due to market disruption, 
threatening to impede the orderly development of trade in these 
products, such Member could request consultations with China with a 
view to easing or avoiding such market disruption. The Member 
requesting consultations would provide China, at the time of the 
request, with a detailed factual statement of reasons and 
justifications for its request for consultations with current data 
which, in the view of the requesting Member, showed: (1) the existence 
or threat of market disruption; and (2) the role of products of Chinese 
origin in that disruption;

(b) Consultations would be held within 30 days of receipt of the 
request. Every effort would be made to reach agreement on a mutually 
satisfactory solution within 90 days of the receipt of such request, 
unless extended by mutual agreement;

(c) Upon receipt of the request for consultations, China agreed to hold 
its shipments to the requesting Member of textile or textile products 
in the category or categories subject to these consultations to a level 
no greater than 7.5 per cent (6 per cent for wool product categories) 
above the amount entered during the first 12 months of the most recent 
14 months preceding the month in which the request for consultations 
was made;

(d) If no mutually satisfactory solution were reached during the 90-day 
consultation period, consultations would continue and the Member 
requesting consultations could continue the limits under subparagraph 
(c) for textiles or textile products in the category or categories 
subject to these consultations;

(e) The term of any restraint limit established under subparagraph (d) 
would be effective for the period beginning on the date of the request 
for consultations and ending on 31 December of the year in which 
consultations were requested, or where three or fewer months remained 
in the year at the time of the request for consultations, for the 
period ending 12 months after the request for consultations;

(f) No action taken under this provision would remain in effect beyond 
one year, without reapplication, unless otherwise agreed between the 
Member concerned and China; and: 

(g) Measures could not be applied to the same product at the same time 
under this provision and the provisions of Section 16 of the Draft 
Protocol. 

[End of section]

Appendix III: Summary of CITA Determinations on Market-Disruption-Based 
Requests to Date: 

Product: Brassieres and other body supporting garments; 
Key dates: Request filed: July 24, 2003. 
CITA determination: Nov. 17, 2003. 
Consultation requested/quotas imposed: December 24, 2003; 
Key elements of CITA finding that market was disrupted: U.S. 
production, including outward processing, dropped from 28,375,000 
dozens in 2000 to 27,781,000 dozens in the year ending June 2003. 
U.S. producers' share of the market fell from 52.8 percent in 2000 to 
43.8 percent in the year ending June 2003; 
Role of imports from China in present disruption: Total imports grew 17 
percent from 2000 to year-end October 2003. Imports from China grew 291 
percent in the same period. China went from the sixth largest supplier 
of such garments to the United States in 2001 to the largest source in 
2002 and 2003. China gained U.S. market share (15.5 percentage points 
gained between 2000 and year- end June 2003), and gains came at the 
expense of domestically produced garments, including U.S. outward 
processing; 
Role of imports from China in threat to disrupt the U.S. market in the 
near future: Enormous capacity of China to produce textile and apparel 
products for export. Lower average prices than other suppliers. Rapid 
change since integration suggests that without action, current trends 
in imports from China will likely continue. China has made significant 
investment in plants, equipment, and research and development in its 
textile and apparel industry. 

Product: Cotton and man-made fiber dressing gowns; 
Key dates: Request filed: July 24, 2003. 
CITA determination: Nov. 17, 2003. 
Consultation requested/quotas imposed: Dec 24, 2003; 
Key elements of CITA finding that market was disrupted: U.S. production 
plus outward processing fell by about 40 percent from 2000 to year-end 
June 2003. 
Share of the market held by U.S. producers fell 17.9 percentage points 
between 2000 and year-end June 2003; 
Role of imports from China in present disruption: Total U.S. imports 
grew by 77 percent from 2000 to yearend October 2003. U.S. imports from 
China increased 1,483 percent during the same period. Market share of 
imports from China increased from 3.9 percent in 2000 to 30.7 percent 
for the year ending June 2003. Imports from the rest of the world minus 
outward processing and U.S. producers plus outward processing both lost 
market share; 
Role of imports from China in threat to disrupt the U.S. market in the 
near future: (See above explanation under "Brassieres."). 

Product: Knit fabric; 
Key dates: Request filed: July 24, 2003. 
CITA determination: Nov. 17, 2003. 
Consultation requested/quotas imposed: Dec 24, 2003; 
Key elements of CITA finding that market was disrupted: U.S. production 
declined from about 657 million kilograms in 2000 to about 480 million 
kilograms in 2002. U.S. producers' market share had declined 9.6 
percent between 2000 and 2002. Financial difficulties of two publicly 
traded firms engaged primarily in the manufacture of knit fabric; 
Role of imports from China in present disruption: Total imports 
increased 42 percent from 2001 to year-end October 2003, while knit 
fabric imports from China increased 21, 307 percent from 2000 to year-
end October 2003. Imports from China gained market share at the expense 
of U.S. producers: Of the 9.6 percent of U.S. market share lost from 
2000 to 2002 1.1 percent is attributable to Chinese imports; 
Role of imports from China in threat to disrupt the U.S. market in the 
near future: (See above explanation under "Brassieres."); CITA also 
stated that the significant increase in knit fabric import volume since 
2001 suggested that imports would continue to increase in the near 
future. 

Product: Cotton, man-made fiber, and wool socks; 
Key dates: Request filed: June 28, 2004. 
CITA determination: Oct. 22, 2004. 
Consultation requested/quotas imposed: Oct. 29, 2004; 
Key elements of CITA finding that market was disrupted: Excluding 
outward processing, U.S. imports increased from 51,014,517 to 
98,976,106 dozen pairs between 2001 and 2003. U.S. production, 
including outward processing, dropped from 246 million dozen pairs to 
214 million dozen pairs from 2001 to 2003. U.S. production plus outward 
processing market share fell from 82.9 in 2001 percent to 68.4 percent 
in 2003. Employment and number of sock-producing establishments both 
declined; 
Role of imports from China in present disruption: Between 2001 and 
August 2004, Chinese imports grew 4, 211 percent. Between 2001 and year-
end August 2004 total world imports increased 100 percent. China went 
from the 12th largest foreign supplier to the United States in 2001 to 
the largest supplier by year-end August 2004. China's market share grew 
from 0.3 percent in 2001 to 7 percent in 2003, and the market share 
gain came at the expense of U.S. producers; 
Role of imports from China in threat to disrupt the U.S. market in the 
near future: (See above explanation under "Brassieres."). 

Source: CITA Statements of Reasons and Justifications. 

[End of table]

[End of section]

Appendix IV: Textile and Apparel Products Imported from China for Which 
U.S. Production Data Are Unavailable: 

U.S. production data on 32 of 167 textile and apparel categories are 
unavailable. Table 2 lists these 32 product categories and provides 
information on the size of U.S. imports from China in 1995 and 2004, 
imports from China as a percentage of total U.S. imports, the average 
annual percentage change in imports since China became a WTO member in 
2001, and the quota fill rates for these product categories. Quota fill 
rates (as of December 1, 2004) show what share of the quota allocation 
for each product category was already allocated near the end of the 
quota period (December 31, 2004). Quotas on these products were removed 
completely on January 1, 2005, but the quota fill rates provide some 
information about how constraining the quotas were prior to their 
removal. In addition, notes at the end of the table identify 
qualitative information from OTEXA and Census on why the data for each 
category are unavailable. 

Table 2: Import Data for Product Categories for Which U.S. Production 
Data Are Unavailable: 

Category name: Products removed from quota prior to January 1, 2005, or 
never under quota[A]: 

Category name: Flat goods, handbags, and luggage[B]; 
Category number: 670; 
Imports from China, 1995: $196,648; 
Imports from China, 2004: $1,735,685; 
Share of China in U.S. imports from all countries, 2004 (percent): 78%; 
Average annual change, imports from China 2001-2004 (percent): 68%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Wool floor coverings[D]; 
Category number: 465; 
Imports from China, 1995: $181,679; 
Imports from China, 2004: $164,981; 
Share of China in U.S. imports from all countries, 2004 (percent): 18%; 
Average annual change, imports from China 2001-2004 (percent): -2%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Womens' and girls' man-made fiber down-filled coats[C]; 
Category number: 654; 
Imports from China, 1995: $32,522; 
Imports from China, 2004: $203,076; 
Share of China in U.S. imports from all countries, 2004 (percent): 85%; 
Average annual change, imports from China 2001-2004 (percent): 42%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Other man-made fiber manufactures[D]; 
Category number: 669; 
Imports from China, 1995: $13,804; 
Imports from China, 2004: $264,822; 
Share of China in U.S. imports from all countries, 2004 (percent): 39%; 
Average annual change, imports from China 2001-2004 (percent): 148%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Men's and boys' man-made fiber down-filled coats[C]; 
Category number: 653; 
Imports from China, 1995: $66,801; 
Imports from China, 2004: $108,207; 
Share of China in U.S. imports from all countries, 2004 (percent): 85%; 
Average annual change, imports from China 2001-2004 (percent): 6%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Man-made fiber floor coverings[D]; 
Category number: 665; 
Imports from China, 1995: $8,933; 
Imports from China, 2004: $96,762; 
Share of China in U.S. imports from all countries, 2004 (percent): 16%; 
Average annual change, imports from China 2001-2004 (percent): 48%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Special purpose fabric[C]; 
Category number: 229; 
Imports from China, 1995: $4,175; 
Imports from China, 2004: $122,266; 
Share of China in U.S. imports from all countries, 2004 (percent): 14%; 
Average annual change, imports from China 2001-2004 (percent): 134%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Wool gloves and mittens[C]; 
Category number: 431; 
Imports from China, 1995: $5,182; 
Imports from China, 2004: $15,857; 
Share of China in U.S. imports from all countries, 2004 (percent): 76%; 
Average annual change, imports from China 2001-2004 (percent): 6%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Cotton handkerchiefs[B]; 
Category number: 330; 
Imports from China, 1995: $6,143; 
Imports from China, 2004: $18,832; 
Share of China in U.S. imports from all countries, 2004 (percent): 91%; 
Average annual change, imports from China 2001-2004 (percent): 15%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Women's and girls' cotton down-filled coats[C]; 
Category number: 354; 
Imports from China, 1995: $7,114; 
Imports from China, 2004: $3,941; 
Share of China in U.S. imports from all countries, 2004 (percent): 78%; 
Average annual change, imports from China 2001-2004 (percent): 130%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Nonwoven fabric[B]; 
Category number: 223; 
Imports from China, 1995: $830; 
Imports from China, 2004: $14,264; 
Share of China in U.S. imports from all countries, 2004 (percent): 2%; 
Average annual change, imports from China 2001-2004 (percent): 505%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Wool blankets[C]; 
Category number: 464; 
Imports from China, 1995: $414; 
Imports from China, 2004: $4,055; 
Share of China in U.S. imports from all countries, 2004 (percent): 24%; 
Average annual change, imports from China 2001-2004 (percent): 30%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Men's and boys' cotton down-filled coats[C]; 
Category number: 353; 
Imports from China, 1995: $30,248; 
Imports from China, 2004: $4,293; 
Share of China in U.S. imports from all countries, 2004 (percent): 68%; 
Average annual change, imports from China 2001-2004 (percent): -7%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Nontextured filament yarn[B]; 
Category number: 606; 
Imports from China, 1995: $0; 
Imports from China, 2004: $3,138; 
Share of China in U.S. imports from all countries, 2004 (percent): 3%; 
Average annual change, imports from China 2001-2004 (percent): 17,654%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Man-made fiber handkerchiefs[B]; 
Category number: 630; 
Imports from China, 1995: $2,286; 
Imports from China, 2004: $1,309; 
Share of China in U.S. imports from all countries, 2004 (percent): 49%; 
Average annual change, imports from China 2001-2004 (percent): -7%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Subtotal; 
Category number: N/A; 
Imports from China, 1995: $556,780; 
Imports from China, 2004: $2,761,488; 
Share of China in U.S. imports from all countries, 2004 (percent): 42%; 
Average annual change, imports from China 2001-2004 (percent): 50%; 
Quota fill rate as of December 1, 2004: N/A. 

Products removed from quota January 1, 2005: 

Category name: Other cotton manufactures[D]; 
Category number: 369; 
Imports from China, 1995: $280,155; 
Imports from China, 2004: $1,070,693; 
Share of China in U.S. imports from all countries, 2004 (percent): 46%; 
Average annual change, imports from China 2001-2004 (percent): 42%; 
Quota fill rate as of December 1, 2004: 32.5%. 

Category name: Babies' garments and clothing accessories[D]; 
Category number: 239; 
Imports from China, 1995: $76,606; 
Imports from China, 2004: $1,103,435; 
Share of China in U.S. imports from all countries, 2004 (percent): 55%; 
Average annual change, imports from China 2001-2004 (percent): 135%; 
Quota fill rate as of December 1, 2004: No information. 

Category name: Other man-made fiber furnishings[D]; 
Category number: 666; 
Imports from China, 1995: $40,702; 
Imports from China, 2004: $1,211,228; 
Share of China in U.S. imports from all countries, 2004 (percent): 61%; 
Average annual change, imports from China 2001-2004 (percent): 194%; 
Quota fill rate as of December 1, 2004: 83.1%. 

Category name: Other cotton apparel[D]; 
Category number: 359; 
Imports from China, 1995: $134,105; 
Imports from China, 2004: $413,203; 
Share of China in U.S. imports from all countries, 2004 (percent): 42%; 
Average annual change, imports from China 2001-2004 (percent): 38%; 
Quota fill rate as of December 1, 2004: 49.8 and 66.4%[A]. 

Category name: Other man-made fiber apparel[D]; 
Category number: 659; 
Imports from China, 1995: $110,658; 
Imports from China, 2004: $330,931; 
Share of China in U.S. imports from all countries, 2004 (percent): 16%; 
Average annual change, imports from China 2001-2004 (percent): 32%; 
Quota fill rate as of December 1, 2004: 84.2 and 77.9 and 76.8%[A]. 

Category name: Bedspreads and quilts[C]; 
Category number: 362; 
Imports from China, 1995: $120,525; 
Imports from China, 2004: $183,713; 
Share of China in U.S. imports from all countries, 2004 (percent): 34%; 
Average annual change, imports from China 2001-2004 (percent): 6%; 
Quota fill rate as of December 1, 2004: 80.1%. 

Category name: Other wool apparel[D]; 
Category number: 459; 
Imports from China, 1995: $12,595; 
Imports from China, 2004: $138,199; 
Share of China in U.S. imports from all countries, 2004 (percent): 55%; 
Average annual change, imports from China 2001-2004 (percent): 28%; 
Quota fill rate as of December 1, 2004: No info. 

Category name: Wool knit shirts and blouses[C]; 
Category number: 438; 
Imports from China, 1995: $5,102; 
Imports from China, 2004: $9,560; 
Share of China in U.S. imports from all countries, 2004 (percent): 3%; 
Average annual change, imports from China 2001-2004 (percent): 5%; 
Quota fill rate as of December 1, 2004: 93%. 

Category name: Yarns put up for retail sale, and sewing thread[B]; 
Category number: 200; 
Imports from China, 1995: $3,032; 
Imports from China, 2004: $9,434; 
Share of China in U.S. imports from all countries, 2004 (percent): 5%; 
Average annual change, imports from China 2001-2004 (percent): 43%; 
Quota fill rate as of December 1, 2004: 89.4%. 

Category name: Other wool manufactures[D]; 
Category number: 469; 
Imports from China, 1995: $3,699; 
Imports from China, 2004: $5,257; 
Share of China in U.S. imports from all countries, 2004 (percent): 29%; 
Average annual change, imports from China 2001-2004 (percent): 8%; 
Quota fill rate as of December 1, 2004: 64.8%[A]. 

Category name: Woven fabric containing 85 percent or more by weight 
artificial staple[C]; 
Category number: 611; 
Imports from China, 1995: $3,081; 
Imports from China, 2004: $2,756; 
Share of China in U.S. imports from all countries, 2004 (percent): 13%; 
Average annual change, imports from China 2001-2004 (percent): 6%; 
Quota fill rate as of December 1, 2004: 32.1%. 

Category name: Specialty yarns[C]; 
Category number: 201; 
Imports from China, 1995: $346; 
Imports from China, 2004: $855; 
Share of China in U.S. imports from all countries, 2004 (percent): 0%; 
Average annual change, imports from China 2001-2004 (percent): -5%; 
Quota fill rate as of December 1, 2004: 64.8%[A]. 

Category name: Other wool fabric[D]; 
Category number: 414; 
Imports from China, 1995: $95; 
Imports from China, 2004: $142; 
Share of China in U.S. imports from all countries, 2004 (percent): 0%; 
Average annual change, imports from China 2001-2004 (percent): -25%; 
Quota fill rate as of December 1, 2004: 64.8%[A]. 

Category name: Man-made fiber fabric, woven, containing more than 15 
percent but less than 36 percent wool[C]; 
Category number: 624; 
Imports from China, 1995: $1; 
Imports from China, 2004: $215; 
Share of China in U.S. imports from all countries, 2004 (percent): 1%; 
Average annual change, imports from China 2001-2004 (percent): -20%; 
Quota fill rate as of December 1, 2004: 64.8%[A]. 

Category name: Subtotal; 
Category number: N/A; 
Imports from China, 1995: $790,702; 
Imports from China, 2004: $4,479,622; 
Share of China in U.S. imports from all countries, 2004 (percent): 41%; 
Average annual change, imports from China 2001-2004 (percent): 60%; 
Quota fill rate as of December 1, 2004: N/A. 

Products currently subject to safeguards measures (socks): 

Category name: Hosiery (socks)[E]; 
Category number: 632(part); 
Imports from China, 1995: $515; 
Imports from China, 2004: $221,348; 
Share of China in U.S. imports from all countries, 2004 (percent): 57%; 
Average annual change, imports from China 2001-2004 (percent): 295%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Hosiery (socks)[E]; 
Category number: 332; 
Imports from China, 1995: $1,222; 
Imports from China, 2004: $4,848; 
Share of China in U.S. imports from all countries, 2004 (percent): 1%; 
Average annual change, imports from China 2001-2004 (percent): 32%; 
Quota fill rate as of December 1, 2004: N/A. 

Category name: Hosiery (socks)[E]; 
Category number: 432; 
Imports from China, 1995: $0; 
Imports from China, 2004: $2,103; 
Share of China in U.S. imports from all countries, 2004 (percent): 10%; 
Average annual change, imports from China 2001-2004 (percent): 21%; 
Quota fill rate as of December 1, 2004: N/A. 

Subtotal; 
Imports from China, 1995: $$1,737; 
Imports from China, 2004: $228,298; 
Share of China in U.S. imports from all countries, 2004 (percent): 21%; 
Average annual change, imports from China 2001-2004 (percent): 197%. 

Total (all products for which production data is unavailable); 
Category number: N/A;
Imports from China, 1995: $1,349,219; 
Imports from China, 2004: $7,469,408; 
Share of China in U.S. imports from all countries, 2004 (percent): 40%; 
Average annual change, imports from China 2001-2004 (percent): 57%; 
Quota fill rate as of December 1, 2004: N/A. 

N/A = Not applicable. 

Source: GAO analysis of U.S. Department of Commerce data. 

Notes: Safeguard on hosiery (socks) is a single safeguard measure 
covering products from all three categories. 

[A] Quota restraints are applied against a group of categories or 
subcategories in these cases. The fill rates either apply to the 
combined categories or several fill rates apply to one category. 

[B] Census does not collect production data. 

[C] Census does collect domestic production data, but the data cannot 
be published to avoid disclosure of individual company information. 

[D] Census may collect some data, but Census production descriptions do 
not match CITA categories. 

[E] Census began collecting data in December 2004: 

[End of table]

[End of section]

Appendix V: Threat-Based Requests for Safeguard Action Filed by U.S. 
Producer Groups, 2004: 

Description: Cotton trousers; 
Category: 347/348; 
Date request received by CITA chair (2004): Oct. 8; 
Date CITA accepted request for consideration (2004): Oct. 29. 

Description: Knit cotton shirts and blouses; 
Category: 338/339; 
Date request received by CITA chair (2004): Oct. 13; 
Date CITA accepted request for consideration (2004): Nov. 3. 

Description: Men's and boys' cotton and man-made fiber shirts, not 
knit; 
Category: 340/640; 
Date request received by CITA chair (2004): Oct. 13; 
Date CITA accepted request for consideration (2004): Nov. 3. 

Description: Knit man-made fiber shirts and blouses; 
Category: 638/639; 
Date request received by CITA chair (2004): Oct. 13; 
Date CITA accepted request for consideration (2004): Nov. 3. 

Description: Man-made fiber trousers; 
Category: 647/648; 
Date request received by CITA chair (2004): Oct. 13; 
Date CITA accepted request for consideration (2004): Nov. 3. 

Description: Cotton and man-made fiber underwear; 
Category: 352/652; 
Date request received by CITA chair (2004): Oct. 15; 
Date CITA accepted request for consideration (2004): Nov. 3. 

Description: Combed cotton yarn; 
Category: 301; 
Date request received by CITA chair (2004): Oct. 27; 
Date CITA accepted request for consideration (2004): Nov. 18. 

Description: Other synthetic filament fabric; 
Category: 620; 
Date request received by CITA chair (2004): Nov. 8; 
Date CITA accepted request for consideration (2004): Dec. 1. 

Description: Men's and boys' wool trousers; 
Category: 447; 
Date request received by CITA chair (2004): Nov. 12; 
Date CITA accepted request for consideration (2004): Dec. 6. 

Description: Knit fabric; 
Category: 222; 
Date request received by CITA chair (2004): Nov. 19; 
Date CITA accepted request for consideration (2004): Dec. 13. 

Description: Dressing gowns and robes; 
Category: 350/650; 
Date request received by CITA chair (2004): Nov. 24; 
Date CITA accepted request for consideration (2004): Dec. 16. 

Description: Brassieres and other body supporting garments; 
Category: 349/649; 
Date request received by CITA chair (2004): Dec. 1; 
Date CITA accepted request for consideration (2004): Dec. 22. 

Source: Defendant's Memorandum in Support of its Motion to Dismiss and 
Opposition to Plaintiff's Motion for a Preliminary Injection, Sch. A, 
Ass'n of Importers of Textiles and Apparel, Ct. No. 04-00598 (C.I.T. 
Dec. 15, 2004). 

[End of table]

[End of section]

Appendix VI: Comments from the Committee for the Implementation of 
Textile Agreements: 

UNITED STATES DEPARTMENT OF COMMERCE: 
The Under Secretary for International Trade: 
Washington, D. C. 20230:

Mr. Loren Yager: 
Director: 
International Affairs and Trade:
United States Government Accountability Office: 
Washington, D.C. 20548:

MAR 11 2005:

Dear Mr. Yager:

Thank you for providing us with your draft report regarding 
implementation of the textile safeguard provision of China's WTO 
accession agreement by the Committee for the Implementation of Textile 
Agreements (CITA). The study demonstrates a strong effort by GAO staff 
to understand the safeguard provision and to frame the status of the 
safeguard's application within the prevailing circumstances.

As you know, this year marked a watershed for international trade, with 
the conclusion of a liberalization process under the WTO Agreement on 
Textiles and Clothing (ATC) that was agreed to by the United States and 
other countries more than ten years ago. On January 1, 2005, all WTO 
Members lifted their quotas on textile and clothing imports, and the 
structure of global trade rules that have governed in this sector for 
several decades has been irreversibly changed. Consumers will benefit 
from lower prices for clothing and other essential products, but 
producers around the world, including in the United States, will face 
significant new challenges as a result of increased global competition.

The United States has been preparing for this change for many years. 
Recognizing that China had the potential to account for a major share 
of global exports of textiles and clothing once quotas were lifted, we 
negotiated a special textile safeguard as part of China's accession to 
the WTO - the subject of your draft report - that pen-nits the United 
States to impose limits on textile and apparel imports from China when 
our domestic industry is faced with market disruption or the threat 
thereof. And in all of our recent free trade agreements, including our 
agreement with the five Central American countries and the Dominican 
Republic, we have negotiated special provisions that open new market 
opportunities for our domestic industry and leverage the competitive 
strengths of America's textile and clothing businesses and workers. 
Specifically, our free trade agreements include special textiles 
provisions that encourage the use of U.S. yarn and fabric, special 
textiles enforcement mechanisms, and textiles safeguards.

The Administration is committed to assisting U.S. textile and apparel 
firms and workers to adjust to competition from China and elsewhere 
that is causing or threatening to cause market disruption, using all 
available tools under U.S. trade laws and China's WTO accession 
agreement. The special China textile safeguard has proven to be an 
important mechanism for such adjustment. In fact, as the GAO's draft 
report indicates, CITA has applied the safeguard in four of the five 
actual market disruption cases in which U.S. producers have requested 
relief. Prior to the U.S. Court of International Trade's decision to 
enjoin CITA from further consideration of requests for relief based on 
"threat" of market disruption (as opposed to actual market disruption) 
from imports from China, pending the outcome of litigation, CITA had 
also agreed to consider twelve such "threat" requests filed at the end 
of 2004.

A good portion of the GAO's draft report focuses on many of the issues 
that are the subject of this ongoing litigation - including whether the 
current procedures allow for threat-based cases, as CITA believes they 
do. The Department of Justice has asked that CITA agencies not comment 
on those issues, so I cannot comment on many of the specific statements 
in the report. However, I am concerned regarding some of the 
conclusions in the report regarding the timing of issuance and 
sufficiency of CITA's current procedures. Prior to China's accession to 
the WTO, the United States, through CITA, had conducted numerous 
textile safeguard investigations pursuant to its authority under 
various bilateral and multilateral agreements (including the ATC and 
earlier U.S.-China bilateral textile agreements). Following China's WTO 
accession, CITA engaged Congress and other government agencies in the 
formulation of procedures to facilitate implementation of the WTO China 
textile safeguard. Thus, the procedures published in May 2003 were the 
result of extensive work and collaboration among many governmental 
agencies. The issuance of these guidelines, while not required by the 
WTO China textile safeguard agreement, or U.S. law, marked a 
significant step for CITA in increasing not only the transparency of, 
but also public involvement in its investigations.

As indicated in the Administration's submissions to the courts, China's 
accession agreement and CITA's published procedures clearly permit the 
United States to request consultations with China, and take safeguard 
action, based on the threat of market disruption. In addition, some of 
the GAO's assertions appear to be premised upon statements from private 
entities involved in the litigation.[NOTE 1] Although we are not able 
to comment on such statements while the litigation is pending, we refer 
GAO to the Administration's submissions in those proceedings.

The GAO also recommends that the Commerce Department, as CITA's chair, 
periodically review the products included in Census Bureau surveys of 
U.S. textile and apparel production and, with public input, conduct a 
risk assessment aimed at identifying industry sectors at high risk of 
experiencing import surges from China and associated disruption. GAO 
further recommends that on the basis of the risk assessment, the Office 
of Textiles and Apparel work with the Census Bureau to insure that 
these industry sectors are included in subsequent production data 
gathering efforts.

Commerce's Office of Textiles and Apparel has for many years 
periodically reviewed, and consulted with the Census Bureau and with 
representatives of the domestic industry and workers, regarding the 
products included in Census Bureau surveys of U.S. textile and apparel 
production. Moreover, the textile category system was developed in 
close consultation with representatives of the domestic industry and 
workers and with Census. There are a variety of reasons why production 
data is not published by Census for certain categories. These are 
summarized in Attachment 1.

We do not believe it would be productive for Commerce to conduct "risk 
assessments" of industry segments for which production data is not 
published by the Census Bureau. For the reasons described in Attachment 
1, we believe that domestic entities would have an interest in 
requesting safeguard action on few, if any, of the remaining products 
for which Census production data is unavailable. If domestic entities 
were to have such an interest in a defined industry sector, we believe 
in virtually all instances that they would be able to collect 
production data. Lack of Census production data would not be a 
substantial impediment to a safeguard request in such instances. Should 
an industry believe that any of these products is at risk of market 
disruption and that China may play a role in such disruption, Commerce 
and CITA stand ready to consult with that industry regarding its China 
textile safeguard options, including ways in which the production data 
requirement can be satisfied. I understand that the Census Bureau has 
provided informal comments to GAO stating that Census is open to 
recommendations to collect additional information but indicating 
constraints to further collection and publication of textile and 
apparel data.

I have enclosed, as Attachments 2 and 3, specific comments relating to 
the report's text (where allowable in light of the current court 
proceedings) and technical corrections relating to appendices II and 
III.

I appreciate the opportunity to provide comments on the draft report.

Sincerely, 

Signed by: 

Grant D. Aldonas:

NOTE: 

[1] See, e.g., pages 3, 4, 25.

GAO Comments: 

1. Our report does not take any position on the legal issues that are 
the subject of the ongoing litigation between the U.S. Association of 
Importers of Textiles and Apparel and the United States, including 
whether CITA's procedures allow for threat-based cases. We acknowledge 
CITA's extensive consultations and that the procedures represent a 
significant increase in the transparency of its investigations compared 
with those conducted under other agreements such as the Agreement on 
Textiles and Clothing. Nevertheless, 17 months is a significant amount 
of time to issue procedures to inform the public about CITA's process. 
The timing of issuance of the procedures necessitated industry groups 
refiling several safeguard action requests made months before the 
procedures were published. As noted in appendix I, we independently 
reviewed China's WTO accession agreement and CITA's procedures, and 
other information, as well as submissions from all parties involved in 
the ongoing litigation. We maintain that our description of CITA's 
procedures and findings about the public's uncertainty at the time 
represents a balanced summation of the facts. We continue to believe 
the procedures could be improved in this regard to further increase 
transparency and clarity. 

2. According to a Bureau of the Census official, the Current Industrial 
Report program's coverage of U.S. textile and apparel production 
remained unchanged from 1993 until the completion of a programwide 
review in 2004 to reassign resources to manufacturing areas of 
increasing economic importance. We consider a risk assessment to be a 
useful and timely exercise due to the recent change in long-standing 
trade rules for textiles and apparel and resulting increased global 
competition. We agree that there are a variety of reasons why 
production data might be unavailable, including suppressing data to 
protect respondent confidentiality, and we amplified our discussion on 
textile and apparel production data accordingly. Additionally, we 
modified our recommendation to acknowledge that in certain instances, 
making the production data available might not be feasible. However, we 
found that requesting a safeguard action is substantially more 
difficult when production data are unavailable than when they are 
available; 
for example, it could add months onto the time to prepare a request. 
Accordingly, we believe that lack of production data may constitute a 
substantial impediment to a safeguard action request and steps should 
be taken to mitigate this condition. Furthermore, some industries that 
were not deemed import sensitive in the past may become so in the 
future. 

[End of section]

Appendix VII: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Adam Cowles, (202) 512-9637; 
Michael McAtee, (202) 512-8978: 

Staff Acknowledgments: 

In addition to those named above, R. Gifford Howland, Richard Seldin, 
and Timothy Wedding made significant contributions to this report. 

(320228): 

FOOTNOTES

[1] China became a member of this organization in December 2001. 

[2] In this report, import values for years prior to 2004 have been 
adjusted for inflation and are reported in constant 2004 U.S. dollars 
(see app. I). 

[3] H.R. Rep. No. 108-401, at 574 (2003). 

[4] Forthcoming reports will focus on countervailing duties, other 
safeguard measures, and antidumping duties. 

[5] The agreement does not define the terms "market disruption" or 
"orderly development of trade."

[6] Production values reported here are in 2004 U.S. dollars (see app. 
I). 

[7] Import values reported here are in inflation-adjusted 2004 U.S. 
dollars (see app. I). 

[8] The United States continues to maintain quotas on textile and 
apparel products from selected countries that are not WTO members 
(e.g., Vietnam). 

[9] The United States continues to apply tariffs on these products, 
ranging up to approximately 33 percent. The trade-weighted average U.S. 
tariff on textile and apparel products was 10 percent in 2004, 
according to an official at the U.S. International Trade Commission. 
However, U.S. free-trade agreements and preferential access programs 
provide certain countries with duty-free access to the U.S. market for 
certain textile and apparel products. 

[10] 7 U.S.C. § 1854. 

[11] Exec. Order No. 11651, 37 Fed. Reg. 4699 (Mar. 3, 1972), as 
amended. 

[12] In the case of wool products, the member will generally limit 
growth in relevant Chinese imports to 6 percent above the level 
imported during the first 12 months of the previous 14-month period. 

[13] 68 Fed. Reg. 27787 (May 21, 2003). 

[14] The Administrative Procedure Act generally requires that agencies 
provide an opportunity for the public to comment on rules and 
procedures prior to their enactment. However, the act's rule-making 
procedures do not apply to certain agency activities, including the 
foreign affairs functions of the United States. See 5 U.S.C. § 553 and 
Attorney General's Manual on the Administrative Procedure Act, at 9 
(1947), included as an appendix in American Bar Association, Section of 
Administrative Law and Practice, Federal Administrative Procedure 
Sourcebook (3d ed. 2000). 

[15] If CITA cannot decide within 60 days, it will publish a notice in 
the Federal Register indicating a date by which it will make a 
decision. 

[16] China has taken the position that a safeguard cannot be reapplied 
without its consent. 

[17] Relevant trade preference programs include those established under 
the Caribbean Basin Economic Recovery Act, as amended, 19 U.S.C. §§ 
2701 and following; the Andean Trade Preference Act, as amended 19 
U.S.C. §§ 3201, and following; and the African Growth and Opportunity 
Act, 19 U.S.C. §§ 3701, and following. For further information, see for 
example United States International Trade Commission, The Impact of the 
Caribbean Basin Economic Recovery Act: Sixteenth Report 2001-2002, 
Publication 3636 (Washington, D.C., September 2003). 

[18] Share of imports from China based on 2003 import statistics. 

[19] Share of imports subject to threat-based safeguard requests based 
on petitions filed as of January 15, 2005. Threat-based petitions 
requesting reimposition of recently expired safeguards are not included 
in the 11 percent. All products subject to these safeguard requests 
were under quota until January 1, 2005. An additional 51 percent of 
total U.S. imports of textile and apparel products from China were 
removed from quota limitations in January 1, 2005, but have not been 
the object of safeguard requests. Therefore, a total of 62 percent of 
U.S. imports of textiles and apparel from China were removed from quota 
on January 1, 2005. These figures are based on 2003 import statistics. 

[20] Trade associations representing textile manufacturers that 
produced components of brassieres, dressing gowns and gloves requested 
the safeguard actions. In the case of knit fabric, trade associations 
representing producers of the final product requested the safeguard 
action. In the case of socks, the trade associations requesting the 
safeguard action represented producers of both components and the final 
product. 

[21] CITA had indicated that it would not take action on products 
subject to specific quota limits but that this would not prevent CITA 
from considering a request for safeguard action on a product subject to 
a specific limit if the safeguard action were to take effect after the 
removal of that limit. 

[22] Please see appendix V for a complete list of the 12 threat-based 
requests. In a December 1, 2004, submission to CITA about whether to 
apply the textile safeguard on imports from China of cotton trousers, 
China contended that the language in its WTO commitment showed that the 
textile safeguard could only be imposed when there was actual market 
disruption and not merely a threat of market disruption. China 
contended that the language regarding threat did not refer to the kinds 
of textile and apparel cases that could be brought, but only to the 
material a WTO member could present to China showing why a safeguard 
should be applied. 

[23] CITA officials noted that China's Accession Agreement does not 
obligate WTO members to publish procedures. 

[24] The trade associations did not submit a revised safeguard action 
request for luggage, and no further action has been taken on this 
product. 

[25] The threat-based requests filed by producer groups thus far 
involve the elimination of a quota in the near future. In providing 
technical comments on this report, CITA officials said a threat could 
be found for which imports are increasing extremely rapidly, even 
though those imports have not yet caused market disruption. 

[26] CITA stated that even if the procedures are silent as to how CITA 
intended to evaluate requests for safeguards based solely upon 
allegations of threatened market disruption, CITA's decision to accept 
as sufficient such a request is in compliance with the overall 
principles of the agreement it is implementing. 

[27] U.S. Ass'n. of Importers of Textiles and Apparel v. United States, 
Ct. No. 04-00598 (C.I.T. Dec. 1, 2004). GAO is not taking any position 
in this report on the legal issues involved in the lawsuit. 

[28] 5 U.S.C. §§ 551, and following

[29] The association also argued that CITA did not follow the notice 
and comment requirements of 5 U.S.C. § 553 in promulgating its 
procedures. 

[30] For a more detailed presentation of the administration's legal 
arguments, see Defendant's Memorandum in Support of its Motion to 
Dismiss and Opposition to Plaintiff's Motion for a Preliminary 
Injunction, Ass'n of Importers of Textiles and Apparel, Ct. No. 04- 
00598 (C.I.T. Dec. 15, 2004), and Brief of Defendant-Appellant, United 
States, Ass'n of Importers of Textile and Apparel, Ct. No. 05-1209 
(Fed. Cir. Feb. 14, 2005). 

[31] As a supporting example, the United States cited CITA's 
solicitation of public comments regarding whether there was a threat of 
market disruption to the U.S. market for cotton trousers. In the 
solicitation, CITA listed 6 factors (cited above) as examples of 
information it sought to help it determine whether there was a threat 
of market disruption. 69 Fed. Reg. 64,034 (Nov. 3, 2004). 

[32] U.S. Assn. of Importers of Textiles and Apparel v. United States, 
Ct. No. 04-00598 (C.I.T. Dec. 30, 2004). In support of its order 
granting a preliminary injunction, the court noted that the plaintiff's 
complaint had raised an important question about whether CITA's 
delegated authority to administer textile agreements includes the 
authority to issue regulations pursuant to China's accession agreement. 

[33] U.S. Ass'n of Importers of Textiles and Apparel v. United States, 
Ct. No. 05-1209 (Fed. Cir. Feb. 14, 2005). 

[34] CITA's procedures state that supporting import data should 
demonstrate a rapid increase in imports from China, but do not 
specifically require the data to make that demonstration. The 
administration has argued in court proceedings that "rather than a 
prerequisite for CITA to consider requests, the 'rapid increase' 
language reflects an admonition that CITA will normally look for a 
rapid increase in imports as it considers whether to invoke paragraph 
242 [the China Textile Safeguard]."

[35] The Census Bureau publishes official U.S. import statistics. 

[36] In determining the product detail collected in its manufacturing 
statistics programs, the Census Bureau has specifically worked over 
time to improve the consistency with the classifications in the 
Harmonized System, the international classification system for exports 
and imports developed by the Customs Cooperation Council. 

[37] Individual firms reporting to the Census Bureau in the Current 
Industrial Reports program may waive their right to confidentiality. If 
all companies in the suppressed sector submitted waivers, Census could 
then publish the data. 

[38] Census recently finished a comprehensive review of the Current 
Industrial Reports program. As a result of that review, Census 
restructured survey coverage of the textile sector. Beginning in 2005, 
Census will cancel several textile surveys and consolidate others. We 
have not evaluated the impact that this restructuring may have on 
Commerce's ability to provide textile and apparel production data by 
category. 

[39] An establishment is an individual business location (e.g., a 
factory). A company may have multiple establishments that produce 
textile and apparel products, and each one would be counted 
individually. 

[40] Analysis of import shares are based on 2003 U.S. imports from 
China. 

[41] After the request had been filed and accepted the Bureau of the 
Census indicated that, due to interest among policymakers, it would 
conduct a one-time survey of U.S. sock production. This survey was 
conducted at the end of 2004. Availability of this data should make it 
easier for domestic sock producers to use the safeguard in the future. 

[42] For example, studies from both World Trade Organization and the 
U.S. International Trade Commission suggest that China will become the 
largest supplier to the U.S. market. However, both also suggest 
possible market share gains for other supplier countries. See United 
States International Trade Commission, Textiles and Apparel: Assessment 
of the Competitiveness of Certain Foreign Suppliers to the U.S. Market 
(Washington, D.C., 2004); and World Trade Organization Secretariat 
Staff, The Global Textile and Clothing Industry Post the Agreement on 
Textiles and Clothing (Geneva, Switzerland, 2004). 

[43] This commitment has been implemented by section 421 of the Trade 
Act of 1974, 19 U.S.C. § 2451. 

[44] Forthcoming reports will focus on countervailing duties, the China 
product-specific safeguard, and antidumping duties. 

[45] U.S. Ass'n. of Importers of Textiles and Apparel v. United States, 
Ct. No. 04-00598 (C.I.T. Dec. 30, 2004). 

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