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China Tries Setting Floor Prices For Apparel Exports

Published: 2005-01-07
China last week unveiled a long list of textiles and apparel on which an export tax is being levied from 1 January. Since the export tax is extremely low, it is not expected slowing down sales to foreign countries in the post-quota era. In order to limit retaliation from the US and the EU, China's largest companies apparently accepted setting floor prices in most sensitive categories.

A few days ago, China officially published a long list of products on which a new export tax will be levied. The list in simplified Chinese is available for download on the web (see our link below).

The decision to impose export taxes was announced by mid-December in order to weaken opposition from US textile industry.

From 0.2 to 0.5 yuan per piece

Beijing tries avoiding an expected move by US administration, that could re-impose quotas on most sensitive categories.

The level in the new export taxes is surprisingly low and would have no real effect on exports to the EU and the US, actually.

Duties range from 0.2 to 0.5 yuan per piece (2.4 to 6 US cents). According to comments released in China, these export taxes account for less than 1% of products' value.

Taxes will be imposed on 148 tariff lines, mainly covering most sensitive apparel categories including coats, skirts, knit shirts, woven shirts, pajamas and underwear.

Compared with the level of quota costs that are being wiped out by elimination of textile limits, theses export duties are insignificant.

Certain pants were until now sold at US$7 per piece, including a quota cost of 2 to 3 US$ each, an exporter explained to the domestic press. Taxes of 4 or 5 cents will not make any change, as a consequence.

Six price panels would be set up

More seriously, authorities are trying to limit the fall in prices in order to avoid any retaliation from the US and the EU.

If the United States may use the China textile safeguard that allows limiting imports, the EU would prefer the anti-dumping weaponry, based on lower export prices than effective costs in China.

About 50 major groups accepted to set up price panels and to define a floor price for each of the related products.

Coordinated action and self-discipline would therefore replace official decrees, if possible.

Six panels would be set up, covering knitted shirts, woven shirts, trousers, underwear, cotton sheets and socks, according to the China Chamber of Commerce for Import and Export of Textiles (CCCT).

The same body had suggested to establish such floor prices in August in order to avoid a harmful price war in the post-quota period.

Some large companies accepted participating in the panel, including Esquel Group or Younger.

It is not yet clear if the decision will lead to effective limits in prices' fall or if it is part of a political offensive to avoid sanctions from the US and the EU.