The Marketplace Report: Chinese Textile Limits

Jon Dimsdale of Marketplace tells Alex Chadwick about China's reaction to new limits placed on Chinese textiles by the United States and the European Union.

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ALEX CHADWICK, host:

Back now with DAY TO DAY. I'm Alex Chadwick.

A simmering trade dispute over cheap Chinese textiles got a little hotter today. China's commerce minister has lashed out at US and European complaints about Chinese clothing exports. The minister has now withdrawn China's self-imposed tariffs on some of these products. Joining us is John Dimsdale from the "Marketplace" news bureau in Washington, DC.

John, what is going on here?

Mr. JOHN DIMSDALE ("Marketplace"): This goes back to last January when a 40-year-old system of trade quotas on textiles came to an end as part of a global trade agreement. That eliminated barriers that had been holding back a flood of cheap Chinese-made clothing into the US and Europe. Now to try to cushion that, China voluntarily increased taxes on its own exports of some of its clothing and textiles. But both the US and the EU say even with those taxes, there's been a definite spike in the number of incoming pants and shirts and socks and other textiles from China. The bigger Chinese market share is throwing Americans and Germans and Italian workers out of jobs, so they reimposed barriers on the imports from China. Now China says those barriers violate World Trade Organization rules. Today they took back their voluntary taxes on their own exports.

CHADWICK: Well, John, I don't know if you can answer this question, but is one party or the other--well, it's not one or the other; there are several parties here--but who is to blame in this escalating trade dispute?

Mr. DIMSDALE: That's really hard to say, because both sides are using different statistics to back their own arguments. The US and the Europeans say Chinese clothing imports have jumped by as much as 200 percent this year. Now the Chinese say it's only around 18 percent, and that's only half the jump in the overall Chinese exports for the whole year. So chances are both sides are exaggerating, and it's going to take a referee, somebody like the World Trade Organization, to sort it out.

CHADWICK: And I guess it's serious enough to get the WTO involved.

Mr. DIMSDALE: Potentially this is very serious for the US. China holds $400 billion worth of the US trade deficit. That's one-fourth of the whole. An out-and-out trade war could prompt the Chinese to withdraw its investments in the US, which would result in drastically higher interest rates, potentially slower growth. Now it's not in China's interest to cripple its biggest market, but brinksmanship in trade always makes economists very nervous.

CHADWICK: Thank you, John.

John Dimsdale of Public Radio's daily business show, "Marketplace," from American Public Media.

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