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By Max W. Sung

Export subsidies: On February 11 this year, the United States Trade Representative (USTR) announced that the US has requested consultations with the government of the People's Republic of China over certain measures by which China provides subsidies contingent upon export performance to enterprises in several industries.

The US considers the measures inconsistent with Articles 3.1(a) and 3.2 of the Subsidy and Countervailing Measures Agreement of the WTO.

In its dispute settlement request, the US states:

It appears that China provides export-contingent subsidies through a program establishing "Foreign Trade Transformation and Upgrading Demonstration Bases" and "Common Service Platforms." Demonstration Bases are industrial clusters of enterprises in several industries, including textiles, agriculture, medical products, light industry, special chemical engineering, new materials, and hardware and building materials. Common Service Platforms are service suppliers designated by China to provide services to enterprises in Demonstration Bases. China designates an industrial cluster of enterprises in a particular industry as a Demonstration Base and then provides export-contingent subsidies to enterprises located in the Demonstration Base. These subsidies include provision of discounted or free services through Common Service Platforms or cash grants. In addition, it appears that China also provides certain other export-contingent subsidies to its manufacturers, producers, and farmers.

In its complaint the US estimates that China has given almost US$1 billion over a three-year period to Common Service Platform suppliers that have agreed to provide discounted or free services to Chinese companies, including exporters located in the Demonstration Bases.

In response to the subsidy accusation, China's commerce ministry says that China has consistently followed WTO rules, and policies in the country's Demonstration Bases for exporters are in line with these rules. In the meantime, Brazil, the European Union and Japan have notified the Dispute Settlement Body of the WTO of their desire to be joined in the consultations requested by the US. A WTO statement on March 26 said that the delegation of China has informed the DSB that it has accepted the requests of Brazil, the European Union and Japan to join the consultations. China had set up the first batch of 59 Demonstration bases in 2011 to accelerate the upgrading of its foreign trade. At the bases, clusters of closely related businesses are gathered together. The purpose of establishing the bases, says a local commercial official at a Demonstration Base in Shanxi province, was not to offer industries subsidies but only to create concentrations of export firms focused on a particular industry.

In its WTO filing, the USTR has listed 179 Demonstration Bases in China as areas of its concern. It has also reported that 14% of China's textile exports in 2012 were accounted for 16 of approximately 40 Demonstration Bases in the textiles sector. China reported a trade surplus of $60 billion in January 2015 compared with $31.86 billion the year before - a whopping increase of 88% in one year. On year-on-year basis China's exports to the US has been rising at an annual average of 48.3% while its imports from the US, in comparison, have declined at an annual rate of 20.5% Thus, US trade deficit with China has reportedly increased 23.9% to $342.6 billion last year.

India's export subsidies:
Export subsidy for textile and apparel products in India was expected to be phased out by January this year. The calculation by the WTO Secretariat was based on India having crossed the global share threshold of 3.25% for two consecutive years - 2006 and 2007. It was to phase out textile and apparel export subsidies within the following eight years. Meanwhile, India's share of global textile and apparel trade continued to grow reaching 4.66% by 2013. Thus, earlier in March, some WTO member countries including the United States, the European Union, Turkey and Japan have asked India to phase out export subsidies on textiles and apparel.

The question now is whether or not India will yield to this request. Indications so far are that this is not going to happen. India's minister of state for commerce and industry Nirmala Sitharaman said recently that the government has not taken any decision on phasing out of subsidies as the new foreign trade policy is "still under consideration." D.K. Nair, the secretary general of the Confederation of India Textile Industry (CITI), was also quoted recently as saying that "if the government decides to stop export subsidies completely in 2015 under international pressure, the textile industry will face serious trouble." A review of the WTO rule book has led some to believe that the phasing out of export subsidies for textiles and apparel will not happen until January 2018.

European Union's option: A 1994 WTO agreement gives the EU legislative power to impose anti-subsidy duties and tariffs as a remedial action against subsidies that are considered unfair trade practice. That agreement also defines subsidies as well as whether or not imports of subsidised products are injurious to the EU industry, procedures for initiating and conducting investigations, and rules on the implementation and duration of countervailing measures. In 2011, the EU imposed its first anti-subsidy duties on Chinese imports of high quality paper. After a 15-month investigation, the EU noted that the Chinese government was significantly subsidising its coated fine paper industry by giving cheap loans, allocating land below market value and granting various tax incentives which are in violation of WTO rules. Countervailing measures ranging from 4% to 12% were imposed on imports of high quality paper from China. In addition to anti-subsidy duties, the EU also set anti-dumping duties of 8-35.1% on paper imports. Both anti-subsidy and anti-dumping duties were to be imposed for five years with provision for extension. In response, China's commerce ministry spokesman Yao Jian stated at the time that the EU has violated the WTO rules by imposing both anti-subsidy and anti-dumping trade remedies on the same goods.

It appears that some consider export subsidies as crucial to their local industries and economic development while others regard them as undue and unfair advantage in the competition for global trade. Steps to independently evaluate and counteract export subsidies are being taken both within and outside the WTO. It remains to be seen if they will prove to be effective.












Special Reports

  • Milano Unica moves ahead on the road to internationalisation: Began a decade ago as the showcase for Made-in-Italy products, Milano Unica has come a long way. The Japan Observatory introduced last year, housed 34 Japanese companies at the 10th anniversary show - which was also MU's 20th edition - opened at the Portello Fiera Milano on February 4. Altogether 353 exhibitors including the Japanese and 64 from various European countries took part. As the first major textile show in the year, MU has the ability to attract buyers from all over the world. And there have been proposals to internationalise MU. There are now plans to move in that direction.

    By Vicky Sung, Milan

  • World cotton stocks rise to highest level in 35 years: World cotton stocks are expected to hit 22 million tons at the end of 2014-15season - more than half of it will be in China. Stocks in the rest of the world are forecast to increase for the second consecutive season from 7.5 million tons to 9.5 million tons, which is the largest volume of stocks in the past 35 years and is equal to 60% of the expected mill use in 2014-15. Meanwhile, the gap between global production and consumption has been narrowing and production in the 2014-15 season is projected to exceed consumption by 2.1 million tons and boost world stocks. With stocks holding high and consumption not rising significantly to draw down stocks, prices are expected to remain low. .

Regional Notes


  • Hyosung expands creora production in China: The world leading spandex producer Hyosung is increasing production of creora brand spandex in China. The expansion started at the beginning of this year is aimed at meeting growing demand for spandex in the country.

    By Alpana Shrestha

Sri Lanka

From A.H.H. Saheed, Colombo

  • Textile sector exports up: Lanka's textile and garment exports in the first three quarters of 2014 increased more than 17%, according to Sri Lankan Customs. The value of total shipments stood at US$3,660 million compared with $3,127 million in the previous corresponding period. Shipment of garments which accounted for 95% of the exports expanded by almost 18% while fabric exports declined by just over 30%.

  • Tommy Hilfiger enters Colombo: High-end American designer brand, Tommy Hilfiger, has entered Sri Lanka with its first store in Colombo's Arcade Independence Square.

Ameican Markets

  • US apparel imports keep rising; but only slowly: Apparel imports by the US which registered 4% increase in 2013 slowed down last year, marking only 2% growth. China's market share declined; but other Pacific Rim exporters and South Asian suppliers gained ground. US imports of woven and knit apparel last year stood just slightly above 2013 levels. Total imports for the year reached US$82.974 billion, 2.5% ahead of 2013. Growth of knit apparel imports slightly offset a decline for woven apparel.

    By Douglas Smith, Columbia, S.C .

Products and Technology

  • PFAFF's new shoe post-bed series: Quality assurance and flexible work processes that help ease the strain on the seamstress are important requirements in modern shoe manufacturing and synonymous with state-of-the-art shoe machines to manufacture shoe uppers. PFAFF Industrial's one- and two-needle post-bed machine fulfils these requirements in a unique way and is thus the most used piece of equipment in the shoe industry.

  • Discharge ink for DTG printing: Kornit Digital that provides digital textile printing solutions has launched a new generation discharge ink for the Kornit Avalanche DC Pro direct-to-garment (DTG) printing system.

  • Medically-tested fibre: Tencel, the Lyocell fibre of Lenzing, is the first fibre to be medically tested according to the test method criteria for body compatibility and toxic substances set by FKT, the Fördergemeinschaft Körperverträgliche Textilien e.V. So now, TENCEL is the first fibre that may use the FKT label "Medically tested - tested for toxins".

  • New look for next autumn and winter: Refrigue, the Italian brand with Portuguese origin specialising in work wear's production dedicated to the thermal protection in cold storage, has developed new collection for the autumn/ winter seasons of 2015-16 collection. This new range links fashion to functionality, thus creating styles that exalt fashion details, technical performance and thermal insulation.

  • Printing platform for textiles: Two Italian companies, Thallosjet and Tricksy, are joining forces for developing an inkjet-based printing platform suitable for textiles. The approach of the inkjet-based printing platform they are working on is totally modular: the printhead block can work independently of the printer as a typical stall approach for printing on boxes; while the scanning system can be moved over a platform carrying the printing substrate. This printing platform can be used for textile products, for example, printing cotton T-shirts.

  • Sustainability calculator: Archroma, the specialty chemicals company, has added its portfolio of ZDHC MRSL-compliant chemicals and dyes to its pioneering One Way Sustainability Calculator. The move will allow textile, apparel and footwear customers to pre-select at an early stage products that help to continue to drive down the level of impurities in the manufacturing process.

  • Terasil now has a range also for synthetics: Huntsman Textile Effects has added to its Terasil range of dyes a new product, Terasil TC that is created specifically for dyeing polyester, polyester/cotton as well as microfibre and elastane blends.

  • Textile printer for 24-hour operation: An industrial dye sublimation printer for textiles made of polyester and polyester blends and used usually for sportswear, home textiles and for soft-signage has been launched by Durst Phototechnik, the Italian manufacturer of inkjet printing machines.

  • Teijin's new heat-resistant fibre: A new type of meta-aramid fibre that is heat resistant and has excellent dyeability has been developed by Teijin. It's called Teijinconex neo and is considered suitable for designing and manufacturing protective apparel.

  • Textile repellent technology: The US company, Bolger and O'Hearn, has launched a breakthrough textile repellent technology. The company manufactures over 2,500 specialty chemicals which it had developed for the non-woven, paper and textile industries.

  • Top innovation award for Nya Nordiska's Maki: Nya Nordiska, an innovative textile editeur for modern interior design culture, has received the "Best of Best" of the interior innovation awards for its decoration fabric Maki which is considered an impressive manifestation of the fascination of architecture. The award is given by imm Cologne (internationale möbel messe) an international trade show that is held every January in Cologne.

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