ECONOMIC POLICY COUNCIL MEETING -- SEPTEMBER 24, 1985 2:00 P.M. -- ROOSEVELT ROOM

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CIA-RDP87M00539R002303830009-1
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September 23, 1985
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MEMO
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EXECUTIVE. SECRETARIAT ROUTING SLIP ACTION INFO DATE INITIAL 1 DCI 2 DDCI 3 EXDIR 4 D/ICS 5 DDI 6 DDA 7 DDO 8 DDS&T 9 Chm/NIC 10 GC 11 IG 2 -Co-pt 13 D/Pers 4 -D/OLL 5 -D/PAO 66 SA/IA 17 AO/DCI 18 C/IPD/OIS 19 NIO ECON 20 D/OGI 21 3637 ('0-B" Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 W JNElDENTIAL suy,~ 3513_..__. CABINET AFFAIRS STAFFING MEMORAII Date: 9/23/85 Number: 31699RrA Due By: Subject: Economic Policy Council Meeting -- September 24, 1985 2:00 P.M. -- Roosevelt Room Action ALL CABINET MEMBERS ^ Vice President State Treasury Defense Justice Interior Agriculture Commerce Labor HHS HUD Transportation Energy Chief of Staff Education ^ THE WHITE HOUSE WASHINGTON FYI Ac tio FYI - 0 CEA 11 CEO ^ ^ OSTP ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 0 0 McFarlane Svahn 0 Chew (For WH Staffing) 0 0 ^ ^ ^ ( am 0 ( j 0 0 ^ ^ ^ ^ ^ U3 0 txecc DPC EPC GSA EPA NASA OPM VA SBA REMARKS: The Economic Policy Council will meet on Tuesday, September 24, at 2:00 P.M. in the Roosevelt Room. The agenda and background paper are attached. Alfred H. Kingon ^ Don Clarey Cabinet Secretary ^ Rick Davis 456-2823 ^ Ed Stucky (Ground Floor, West Wing) Associate Director Office of Cabinet Affairs Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87MOO539ROO2303830009-1 xm 129, OEOB) kSanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 MEMORANDUM FOR THE ECONOMIC POLICY COUNCIL FROM: EUGENE J. McALLISTERC` SUBJECT: Agenda and Paper for the September 24 Meeting The agenda and paper for the September 24 meeting of the Economic Policy Council are attached. The meeting is scheduled for 2:00 p.m. in the Roosevelt Room. The single agenda item is the Multifiber Arrangement. At its July 19 meeting, the Council asked that the Working Group on the Multifiber Arrangement (MFA) prepare a paper presenting options regarding the U.S. position in the upcoming negotiations for a successor arrangement to the present MFA, scheduled to expire July 31, 1986. Since informal discussions to begin the negotiating process will take place in mid-October, the Council needs to address now the position the U.S. should take in the negotiations. The paper reviews the current program, economic factors, and domestic and international political considerations. It also presents several options on possible general negotiating positions for Council consideration. Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 September 24, 1985 2:00 p.m. Roosevelt Room Sanitized Copy Approved for Release 2010/11/10 :CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 FROM: Charles R. Carlisle, Chairman working Group of the Economic Policy Council on the Multifiber Arrangement Issue for Decision The EPC decided on July 19 that the United States should enter into negotiations for a successor arrangement to the inter- national Multifiber Arrangement (MFA), which expires July 31, 1986, and that the negotiations should be carried out as expeditiously as possible. The United States has stated this position at a GATT Textiles Committee meeting, and informal discussions to begin the negotiating process will take place in mid-October. The fundamental issue is: Should the United States try to negotiate a more restrictive MFA and bilateral textiles agreements, maintain the present level of protection, or agree to relax protection in world textile and apparel trade? Options (NOTE: Actions listed under each option are illustrative; further work on one or more of the options will be necessary after a first EPC discussion.) Option 1: Continuing As We Are. Possible elements would include extending the present MFA for, say, four to five years, continuing bilateral agreements along present lines, setting quotas on a product-by-product, country- by-country basis, continuing to exempt imports from the developed countries (except Japan), and continuing not to grant special treatment to apparel imports from the CBI nations. The exporting nations would be displeased by lack of future liberalization, and there would be increasing friction as the United States establishes quotas on new entrants into its markets and the poorest nations. The domestic industries would see the decision as the continuation of what they regard as a failed policy and would intensify their efforts to obtain protectionist legislation. EXT BYND 6 YEARS bY_ REASON Option 2: Liberalization. Possible elements would include extending the MFA essentially along present lines but possibly including a "fail-safe" provision allowing importing nations to preserve some part of their domestic industries; granting more liberal terms in bilaterals and setting quotas; according more liberal terms to apparel imports from the CBI nations; continuing to exempt imports from the developed countries, except possibly Japan; lowering textile and apparel tariffs in the New Round negotiations; and tying liberalization to market opening and the ending of subsidies by the exporting nations, especially the NICs. Imports could rise in some years at faster rates than in 1983-84. Foreign governments generally would welcome the U.S. decision (but many exporting nations would fear loss of market share). Chances for a successful New Round would be improved. Consumers would benefit, but domestic industries would be incensed. Congressional reaction would be strongly critical. Option 3: More Protection. Possible elements would include negotiating a new MFA essentially along present lines, but extending coverage to ramie (flax-like), silk, linen and other fibers not now covered, and explicitly recognizing importing nations' rights to hold import growth to low levels; lowering import growth under bilaterals; re-opening bilaterals this fall with major suppliers (e.g., Taiwan, Hong Kong, South. Korea and possibly China), to freeze or cut back imports from those nations; restraining imports from the EEC and other developed nations; instituting some form of import licensing to reduce quota evasion and provide early warning of import surges; and self-initiating fair trade actions. This might hold total import growth to 5 percent or less (compared to 83-84 growth of 25-32 percent). Foreign nations would be extremely displeased, and the United States would have to expend considerable capital internationally to negotiate a more restrictive MFA and bilaterals. New Round would be endangered. Domestic industries would be pleased, but still skeptical about the Administration's real intentions. U.S. retailers would be very critical and consumers would be hurt more than they already are. say, years five to ten; first period: adopt many of Option 3 elements; apply more restrictions against apparel, but grant more Option 4: More Protection, Followed by Liberalization. Possible elements would include negotiating an MFA for say 8-10 years, with explicit commitments requiring both importing and exporting nations to accord gradually more liberal treatment in, Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 liberal treatment to apparel imports from CBI nations; act against imports from developed countries on a selective basis; might negotiate an MFA and bilaterals which would protect against import surges in broad categories of goods. Second period: lower tariffs in New Round negotiations; progressively relax quotas or antisurge provisions; tie liberalization to relaxation of restrictive and subsidy actions by exporting nations, especially NICs. Might be possible to hold annual import quota to 5 percent range in first period. Exporting nations probably would accept a more restrictive MFA and bilaterals provided there were explicit and firm commitments to phase down protection later. -Negotiations, however, would be difficult. Retailers would go along, but it is difficult to predict domestic industries' reaction. They might say this option would only postpone their demise, but they might accept it if they thought the chances of the quota bill's becoming law were not good. Option 5:. Substitution of MFN Tariffs for Quotas (see Treasury paper at Tab B). This option concerns the means of protection and could be compatible with any of the first four. Possible elements would include negotiating changes in the MFA permitting tariffs to be raised (now prohibited by MFA); negotiating changes in bilaterals; substituting tariffs for quotas, possibly only on some items (probably would have to be raised to about 25 percent for textiles, 50 percent for apparel to give protection equivalent to that afforded now); possibly granting GSP treatment. Would eliminate uncertainties caused by quota setting and administrative problems in determining country of origin and transshipments. Incentive for foreign producers to upgrade their production would no longer exist. According to CEA, U.S. Government revenues might rise by over $3 billion annually; a portion might be used for adjustment assistance. However, legislation, which probably would be "Christmas treed," would be necessary. Would be necessary to negotiate compensation on GATT-bound tariffs, and prospects for the New Round could be damaged. Many developing nations would dislike the proposal because they would fear loss of market share to the most efficient producers, e.g., China. The domestic industries would oppose, arguing that substitution was tantamount to liberalization and that some exporting nations would set prices at whatever levels were necessary to sell in the U.S. market. Other Key Questions In considering the options certain key questions should be kept in mind: I Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 1. Should there be a net change in protection? Should protection be scaled back over time or after some period of time? 2.. Should tariffs be substituted for quotas? 3. Should the United States continue to control imports on a country-by-country, product-by-product basis, or seek more comprehensive controls? 4. Should there be fewer, broader product categories, instead of the present 109? 5. How long should a new MFA last? , 6. What should be done about certain categories of countries: a. Industrial countries, whose exports the United States does not now control? b. CBI nations, which would benefit from more liberal treatment of their apparel exports? c. The poorest nations, which have difficulty expanding their exports because of other countries' large quotas? d. Major suppliers -- Taiwan, Korea, Hong Kong, China and Japan -- whose large quotas severely restrict the trade of other nations? 7. Should the United States seek controls on fibers not covered by the present MFA -- ramie,' linen, jute and silk? 8. Should an import licensing system be devised to try to reduce circumvention and fraud and give advance warning of import surges? 9. Should adjustment assistance be provided if import protection is reduced? Discussion Current Program The textile and apparel industries are the most protected U.S. manufacturing industries. In addition to an extensive quota system, there are high tariffs averaging 13 percent on textiles and 25 percent on apparel. Increasingly restrictive programs have been in force since 1961. CONFIDENTIAL Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 i Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 Currently, the United States has some 1,300 restraints on products from 37 countries; 300 have been added since 1983. About two-thirds of apparel and one-third of nonapparel imports are currently under restraint. If quotas cannot be negotiated, the United States may impose them unilaterally, provided there is market disruption. Items made wholly or partially of ramie, jute, linen and silk are not controlled. Imports of those items are rising rapidly. Domestic manufacturers also claim that circumvention and fraud plague the program despite the rules of origin promulgated in final form last April. Neither the United States nor the EEC restrict each other's trade under a "gentlemen's agreement," unwritten and apparently dating back to the 1960s. Japan is the only developed country whose trade the United States does control. Imports rose 25 percent in 1983, and 32 percent in 1984. They were down 1 percent in the first seven months of 1985, but were up 36 percent from the EEC. The EEC as a group is now this country's largest supplier of nonapparel. Import penetra- tion is 33 percent in apparel, 11 percent in nonapparel. U.S. exports have been declining sharply since 1980. Domestic production of apparel and nonapparel declined slightly over the 1972-84 period while consumption grew about 1 percent a year. Apparel production is concentrated in New York, Pennsylvania, California and North Carolina. Productivity has been increasing faster than for all manufacturing, but no technological break- through is in sight which will enable U.S. manufacturers to meet foreign competition without protection. The textile industry is mainly in the Carolinas and Georgia. Plant closings have accelerated this year, but some of the plants are old.' Total job loss in the last two and one-half years has been about 33,Q00, about 5 percent of the textile labor force. Productivity has been rising much faster than in all manufacturing, but the industry is still labor intensive. Profits, which have fluctuated, grew about 22 percent in current dollars from 1979 to 1984. Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 The U.S. manmade fiber industry is very efficient but claims that it is losing its domestic customer base while confronting many foreign trade barriers. U.S. fiber production is stagnant while that in the Far East is expanding rapidly. The textile and apparel industries provide about 1.8 million jobs, many to minority members, women and poorly educated people. Employment has declined by over 500,000 since 1974. About one-quarter of this decline has occurred in the last year. The CEA estimates that the U.S. quotas and tariffs cost consumers about $39 billion a year and preserve about one-fourth to one-third of the jobs. That means each job saved costs $65,000-87,000 a year. USDA believes that additional restrictions on U.S. cotton textile and apparel imports, if all other factors remained the same, would increase returns to U.S. cotton producers. However, retaliation by foreign buyers switching to other sources of supply would be likely to more than offset these gains. Domestic Political Situation The domestic industries claim that nothing less than a quota bill will satisfy them. They accuse the Administration of failing to "enforce" the MFA and of failing to carry out a Presidential commitment to relate import growth to the growth of the domestic market. Despite the intensity of feeling, moderate industry leaders might settle for a much more restrictive MFA and bilateral agreements that would hold annual import growth to around 5 percent. Importers and retailers could accept a more restrictive, comprehensive program in return for greater certainty, "contract sanctity," and an eventual MFA phase-out. International Political Situation Developing exporting nations are very unhappy about current U.S. actions, including this country's discrimination in favor of developed cotIntries, and are calling for an end to the MFA. They are prepared, however, to negotiate. About half of their textile and apparel exports come to the United States. Japan and the EEC are talking vaguely about a more liberal MFA; Canada wants a more restrictive arrangement because it too has experienced rapid import growth. Foreign Trade Barriers Both a Commerce study and one done for the domestic industry leave little doubt that exporting nation governments give Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87MOO539ROO2303830009-1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 I substantial protection to their markets and also intervene in various/ways to assist their domestic industries. The domestic industry claims that both Japan and the EEC more effectively protect their markets than does the United States, the EEC through more restrictive bilateral agreements, and Japan by nontariff barriers and informal arrangements. Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 CONFIDENTIAL. SENSITIVE Tables 1 and 2, attached, present data on U.S. imports of cotton, wool and man-made fiber textiles and apparel from 1972 through July 1985, measured in square yards equivalent (SYE). Tables 2 and 3 present import data by various foreign suppliers from 1980 to June 1986. Tables 5-7 present data on textile and apparel imports not subject to the MFA, such as silk, linen and ramie. The tables show that: Imports accounted for 33 percent of the U.S. apparel market in 1984, 11 percent of the non-apparel market. While the long-term trend of imports-has been up, imports have increased much more rapidly in the 1980-84 period, about 13 percent a year for apparel, 26 percent annually for non-apparel. Moreover, imports increased at a 25 percent rate in 1983 and 32 percent in 1984. They declined 1.3 percent in the first seven months of 1985. -- Imports from the three largest suppliers of apparel and non-apparel products have grown less rapidly than from other suppliers, because of very restrictive growth rates negotiated on many products in 1982. Imports from those countries, however, accounted for over 23 percent of the total growth of imports in the 1982-84 period because of diversification and the full use of large quotas. -- Imports from the EEC, spurred by the dollar's rise, have grown very rapidly in the last several years, and are still increasing while imports from "controlled" sources are leveling off. The EEC countries, taken as a group, are now this country's largest supplier of non-apparel. Italy accounts for 41 percent of the EEC's non-apparel exports to this country, 52 percent of the apparel exports. Although exact figures are not available, a sizeable share of U.S. imports. of textile and apparel products are imported by the domestic industry. One industry source has estimated that 25 percent of apparel imports are received by U.S. apparel manufac- turers, mainly to mix with lines produced domestically to keep costs down. Apparel producers are the main importers of yarns and fabrics, partially to reduce their costs, but also because domestic mills very often will refuse to produce short-run fashion fabrics. Domestic textile mills, however, also import a significant proportion of fabrics from China and other suppliers. More than half of U.S. fabric imports are unfinished cloth, which is dyed and/or printed by converters and U.S. mills and sold to apparel manufacturers. CONFIDENTIAL SENSITIVE Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Table 8 shows that U.S. import growth was much greater than that of either the EEC or Japan in the 1982-84 period, but that imports have a larger market share in those countries than in the U.S. Table 9 shows that while both apparel and non-apparel imports have been increasing rapidly in value since 1980, exports have been declining sharply. Table 10, which presents data on U.S. exports by destination, shows that the fall-off in exports apparently was caused by the rising dollar. For example, U.S. exports to the EC declined 62 percent from 1980 to 1984. Domestic Industries Table 11 presents volume data on apparent domestic consumption and production for both the non-apparel and apparel industries for the period 1972 - 1984. This table shows that: -- Consumption has increased about 1 percent a year, although apparel consumption grew 5 percent a year from 1980 to 1984. -- Domestic production has declined slightly over the entire period. Apparel industry. The apparel industry has about 22,000 shops and plants. Ownership is characterized by a small number of large multi-plant manufacturers engaged in manufacturing of many kinds of apparel and by thousands of small firms -that go in and out of business constantly. For this reason there is no reliable way of estimating the number of firms or plants that have been closed by imports. U.S. apparel production is concentrated in New York, Pennsylvania, California and North Carolina (Table 12). Capital expenditure estimates also are not available for the apparel. industry, but, according to a Commerce study, productivity increased by an annual average of 2.5 percent from 1974 through 1982, compared to 1.7 percent for all manufacturing. Industry leaders claim that they are doing all they can to make their operations more efficient, but that there is no way they can offset labor costs that, for example, in the Far East, often are less than $1 an hour (compared to over $5 in the U.S., exclusive of fringes). Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Most industry leaders also say that no technological breakthrough is in sight (say, over the next ?10 years) that will enable U.S. manufacturers to meet foreign competition without protection. About $7 million is being spent annually by industry and the U.S. Government to fund research at an MIT laboratory on apparel manufacture automation. The Japanese, with substantial government support, are spending $50-60 million a year for research on a robotized, workerless apparel factory, which might be opera- tional by 1990. Textile industry. The U.S. textile industry has about 6,000 plants, mainly in the Carolinas and Georgia (Table 12). Some firms are publicly owned but many are family owned. An average of 47 textile plants closed their doors in both 1983 and 1984; in the first half of 1985, 48 have done so. According to the American Textile Manufacturers Institute, these plant closings, plus lay-offs at plants which have remained open, resulted in a job loss of over 33,000 in the 2-1/2 year period, about five percent of the textile industry labor force (Table 13). It is impossible to say how many plants have closed because of import pressures, either direct or on their customers the (apparel manufacturers), and how many have closed simply because of modernization programs. Textile mill owners say that many of their plants are as modern as any in the world. Textile mill capital expenditures have averaged $1.5 2.0 billion a year since 1979, while productivity grew at an average of 5.2 percent between 1974-82, about three times the average for all manufacturing. Textile mills remain labor intensive, however, with the fourth lowest output per worker among U.S. industries. Moreover, with labor costs averaging, say, about one-third of total manufacturing costs at the mill, textile executives claim that they are unable to offset foreign labor costs that may run as little as 25 cents an hour in China. Table 14 shows that textile corporate profits, which have fluctuated, grew by 22 percent in current dollars from 1979 to 1984. Profits almost doubled from 1982 to 1983 and increased again, marginally, last year. Profits usually run from two to three percent of sales and eight to 12 percent of equity. Fiber Industry. The U.S. fiber industry consists of about 15 companies, mainly subsidiaries of large, U.S. and foreign owned chemical companies. These firms, e.g,., DuPont, have led the world in developing and commercializing new synthetic fibers. Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 I Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 CONFIDENTIAL. SENSITIVE U.S. fiber producers say that they are as efficient as any producers in the world, but that they are badly disadvantaged because their domestic customer base is shrinking while foreign trade barriers seriously hamper export sales. Far Eastern apparel and textile producing countries have been integrating backward. For example, Taiwan (whose producers, U.S. manufacturers claim, are subsidized) has increased its capacity significantly, becoming not only self-sufficient but a substantial exporter of low-cost fiber to offer in Asian markets. China and Korea have also increased their fiber capacity dramatically. Table 15, attached, gives fiber capacity data for the U.S. and principal foreign countries since 1976. Four U.S. fiber plants have closed in the last 18 months, and a fifth is scheduled to close. No new plants have opened and none is planned. USDA believes that additional restrictions on U.S. cotton textile and apparel imports may result in a net loss for U.S. cotton farmers if foreign nations retaliate. In the 1982-84 period, according to USDA, about 25 percent of U.S. cotton textile and apparel imports consisted of U.S. cotton. With foreign cotton production accelerating rapidly, the proportion of U.S. cotton textile and apparel imports comprised of U.S. cotton could drop from about 25 percent to 15 percent in 1986. This is especially likely if the U.S. minimum loan rate continues to support U.S. cotton prices above foreign prices. If U.S. cotton textile and apparel imports were to decrease, U.S. mill use of domestically grown cotton (cotton imports are minimal) would increase. That gain would be partially offset by a decline in U.S. cotton exports, so that a 10 percent decline in U.S. cotton textile and apparel imports might cause total use of U.S. cotton to increase 100,000 - 200,000 bales a year -- about 1.0 percent of the U.S. cotton crop. USDA believes, however, that the loss of goodwill and possible trade retaliation could more than wipe out that gain. Labor Force and Job Toss Table 16 shows that there are approximately 1.9 million textile and apparel workers. Table 14, attached, gives data on the characteristics of the labor force in the textile and apparel industries. This table shows that in both industries: -- The percentage of minority workers is high. CONFIDENTIAL SEN ITIVE CONFIDENTIAL SENSITIVE The percentage of female workers is high. -- The percentage of poorly educated workers is high. -- Workers receive an average wage well below the average of manufacturing workers throughout U.S. industry. In short, the textile and apparel industries afford a large number of entry-level jobs to women and minority members who have difficulty finding jobs elsewhere. Moreover, many apparel and textile plants are in small communities where alternative employment is scarce. Apparel plant jobs may help attract illegal immigrants to large cities. Table 16 gives annual employment data in the textile and apparel industries since 1972. The table shows that: Apparel and non-apparel employment has declined by over 500,000 jobs since 1974, and that about half of that decline has occurred since 1981. Until 1980 employment was declining about 1.4 percent a year; since then the rate of decline has increased to 2.1 percent. The Council of Economic Advisors has estimated that if all U.S. tex- tile and apparel tariffs and quotas were eliminated, American consumers would save $39 billion a year, about $640 a year for a family of four. The CEA also has estimated that if just quotas were eliminated, consumers would gain $21 billion annually. If the textile quota bill now before the Congress were to become law, it would cost consumers an addition $14 billion a year, according to CEA estimates. U $. IMPORTS OF APPAREL (Millions of Square Yards Equivalent) Yearly $ Change Import Share of U.S. market 1972 2,226 17.4 1973 2,090 - 6.2 17.3 1974 1,937 - 7.3 16.8 1975 2,077 + 7.2 18.6 1976 2,449 +17.9 20.5 1977 2,466 + 0.7 19.5 1978 2,905 +17.5 22.7 1979 2,671 - 8.0 21.7 1980 2,884 1 + 7.9 24.7 981 3,123 + 8.3 25.6 1982 3,373 + 8.0 26.9 1983 3,862 1 +14.5 27.7 984 4,703 Compound Annual Change: +21.7 33.0 1972-1984 + 6.4 1980-1984 Jan.-July +13.0 1984 2,905 1985 3,004 + 3.4 Note: Imports are for cotton, wool and man-made fiber. Excluded are from 1972-1984 figures are certain down-filled apparel items which were not included in U.S. import statistics until 1982 (1984 imports equaled 11.6 million square yards). U.S. market is production of all fibers minus exports plus imports. Source: U.S. Department of Commerce Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 U.S. IMPORTS nF NON-APPAREL (Millions of Square Yards Equivalent) Imports of Yarns,Fabrics & Made -Ua Articles Yearly 8 Change Imports of Made-Up Articles O l Import Share n y of Market j/ 1972 4,010 384 2.9 1973 3,035 -24.3 358 2.7 1974 1 2,474 -18.5 315 2.5 975 1976 1,750 -29.3 228 1.9 1 2,537 +45.0 329 2.5 977 197 2,512 - 0.1 328 2.4 8 197 2,835 +12.9 398 2.8 9 1980 1,968 -31.3 413 3.0 1981 2,000 + 1.6 403 3.1 198 2,639 +32.0 490 3.9 2 1983 2,553 + 3.3 579 4.9 1984 3,536 +38.5 799 6.2 (8.4)* 5,063 +43.1 1,238 9.0 (1l.4)* Compound Annual Change: 1972-1984 + 2.0 + 10.2 1980-1984 +26.1 + 32.4 Jan.-Th v 1984 3,378 980 1985 3,200 - 5.3 1,053 (+ 7.5) L Market share for non-apparel is for made-up textile products other than apparel; such as soft-sided luggage, draperies, sheets, etc. Note: Imports are for cotton, wool and man-made fiber. Excluded from 1972-1984 figures are certain man-made fiber products which were not included in U.S. import statistics until 1983 (1984 imports equaled 37.4 million square yards). U.S. market is production of all fibers (including imports of yarns and fabrics consumed by domestic manufactures of the end product) minus exports plus imports. * Import share including certain man-made fiber products not added in statistics until 1983. Source: U.S. Department of Commerce APPAREL 1/ U.S. General Imports (Millions of Square Yards Equivalent) Change Year End 4 Change % of Growth 1983 1984 2/ 85 18 _ 3-7/85 183-7/85 2,884 3,123 3,373 16.9 3,862 4,703 4,800 + 24.3 100 0 MAJOR SUPPLIERS Taiwan Hong Kong 2,106 670 628 2,296 654 656 2,522 745 690 19.8 11.1 9 8 2,847 858 3,098 927 3,060 894 + 7.5 + 4.2 . 22.7 3.8 Korea 494 583 572 . 15 9 760 814 788 + 3.7 3.0 China Philippines 166 148 241 1 355 . 113.5 623 428 681 442 659 374 + 5.8 - 12 7 3.8 62 161 8.8 177 234 350 . + 41.5 --- 18 4 MAJOR DEBTORS Brazil 815 5 933 4 907 5 11.3 16 8 1,021 1,294 1,411 + 38.2 . 41.6 Mexico 92 82 56 . -39 2 9 33 42 +366.7 3.5 Korea 494 583 . 60 86 103 + 71 7 4 6 Argentina ? ? 572 ? 15.9 N/A 623 ? 681 659 . + 5.8 . 3.8 Indonesia 5 ? ? N/A Venezuela ? 18 ? 39 ? 607.3 N/A 46 129 142 +208.7 --- 10.2 Philippines 148 ' N/A Egypt 2 162 2 161 1 8.8 -50 2 177 234 350 + 41.5 18.4 India 69 . ' N/A Nigeria ? 82 ? 73 ' 5.1 N/A 106 ? 131 ? 115 ' + 8.5 1.0 N/A --- ASEAN 276 314 360 30.5 411 661 736 + 79.1 34 6 CBI 117 113 110 -6.1 127 153 186 + 46.6 . 6.3 VERY POOREST 2/ 58 53 56 -2.8 65 93 163 +150.6 10.4 OECD (except Japan) Italy 47 16 41 13 45 -4.7 70 ' 157 206 +193 9 14 5 Spain 2 2 13 -14.0 20 56 65 . +225 0 . 4 8 Portugal 3 2 0.9 3 4 4 . + 33 0 . +? 3 3 -11 5 . Greece 3 ' . 3 13 22 +633 3 2 0 Turkey ? ? 1 -63.4 ' 4 7 . N/A . ?? ' 42.6 4 15 30 +650.0 2.8 ' Less than 1 million square yards. " Less than 1 percent. U Cotton, wool and man-made fiber. Excludes certain apparel products not added to the statistical data base until 1982. 2/ Bangladesh, Haiti and Nepal. Source: U.S. Department of Commerce NON-APPAREL 1/ U.S. General Imports (Millions of Square Yards Equivalent) 198 Change Year End H Cha % of 0 -.1981 . 1987 80-82 nge Growth 1981 1984 7/85 183-7/85 183-7/85 2,000 2,639 2,253 12.6 3,536 5,063 5,008 + 41.6 100.0 MAJOR SUPPLIERS 904 1,276 1,970 117 8 1 834 Japan 378 . , 2,375 2,308 + 25.9 32 2 Italy 109 416 181 437 195 15.5 79 0 572 2 599 568 - 0.6 . N/A Taiwan 112 166 728 . 548 8 56 31 450 476 + 85.8 14.9 China 159 . 319 332 . 109 7 9 355 399 436 + 36.8 7.9 Korea 147 1 . 522 448 + 26 2 6 3 94 277 89.3 332 405 380 . + 14.4 . 3.3 MAJOR DEBTORS 382 474 519 35 9 771 Brazil 12 62 74 . 492 1 12 1,106 988 + 28.4 14.7 Mexico 42 8 . 4 162 145 + 16 9 1 4 Korea 147 4 194 59 277 41.5 89 3 126 332 186 132 . + 4.5 . ?? Argentina ? 4 11 . 3 916 6 8 405 380 + 14.4 3.3 Indonesia 2 7 5 , . 177 7 38 2 1 - 87.5 N/A Venezuela * . 140 126 +231 6 6 0 Phil - ? N/A ? ? . . ippines Egypt 15 83 16 68 10 23 -30.8 -72 0 14 61 7 3 9 N/A - 35.7 ?? N/A India 82 75 60 . -27 1 68 82 39 - 36.0 N/A Nigeria ? ? ? . N/A 122 153 +125.0 5.8 ASEAN 75 127 112 49.2 137 293 308 N/A +124.8 N/A 11.6 CBI 10 11 17 70.4 18 38 31 + 70.5 ?? VERY POOREST 21 1 2 5 271.5 2 3 3 + 85.7- ?? OECD (except Japan) 501 604 648 29 4 Italy 109 181 195 . 79 0 886 256 1,548 1,655 + 86.8 52.2 Spain 10 . 450 476 + 85.8 14 9 19 16 54 3 51 . Portugal 14 . 87 98 + 92.2 3 2 14 18 34 1 25 . Greece * . 45 49 + 96 0 1 6 1 ? -36.8 1 2 . . Turkey 5 3 5 -0.5 4 48 5 60 +500.0 +1,400.0 ?? 3.8 ? Less than 1 million square yards. ?? Less than 1 percent. Cotton, wool and man-made fiber. Excludes certain apparel products not added to the statistical data base until 1982. 2/ Bangladesh, Haiti and Nepal. Source: U.S. Department of Commerce Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 "NON-MFA" APPAREL IMPORTS (Millions of Square Yards Equivalent) 8 Change % of Growth 7Z85 '63-7/85 ' 83-7/85 WORLD 79 252 437 BIG THREE* 65 211 350 + 436.2 79 6 Hong Kong 43 109 196 + 356.8 . 42 7 Korea 15 81 112 + 674.9 . 27 1 Taiwan 8 22 41 + 429.8 . 9.2 China I 6 17 47 + 653.3 11.5 taly 2 6 8 + 285.2 1.7 * Three largest suppliers of MFA textile and apparel products Source: U.S. Department of Commerce Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 SILK APPAREL IMPORTS (Millions of Square Yards Equivalent) 1983 1984 7/85 8 '83Change -7/85 % of Growth '83-7/85 WORLD 67 136 135 + 103.1 100.0 BIG THREE* Hon K 55 115 112 + 102.8 83.8 g ong Korea 42 70 64 + 54.0 32.4 Taiw 12 42 45 + 266.3 48.5 an 1 4 3 + 188.2 2.9 China It l .6 11 13 + 112.0 10.3 a y 2 4 4 + 124.9 2.9 OTHER "NON-MFA" APPAREL IMPORTS I/ (Millions of Square Yards Equivalent) 8 % of 1983 1984 7/85 Change '83-7/85 Growth '8 3-7/85 WORLD 12 116 302 +2,334.5 100.0 BIG THREE* 10 96 238 +2,254.9 78.6 ong Kong Korea 1 39 132 +9,314:9 45.2 Taiwan 2 39 67 +2,964.0 22.4 7 18 38 + 488.3 10.7 China .3 6 34 +12,681 12 0 Macau Ital 0 .8 4 N/A . 1.4 y .4 2 3 +8,240.0 0.8 * Three largest suppliers of MFA textile and apparel products J Would most likely be vegetable fibers other than cotton, such as linen and ramie. Source: U.S. Department of Commerce Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 NON-APPAREL IMPORTS OF ALL FIRERS (Millions of Square Yards Equivalent) 8 Change % of Growth 1984 2/85 '83-7/85 ' __ 83-7/85 WORLD 5,278 7,064 6,638 + 25.8 100.0 Japan B 608 642 622 + 2 2 1 0 razil 669 891 562 . - 16 0 . China 377 561 503 . + 33.5 N/A 9.2 BIG THREE* T i 1,168 1,415 1,280 + 9.5 8 2 a wan K 571 681 610 + 19 3 . 2 9 orea H 385 490 448 . + 16.3 . 4 6 ong Kong 212 244 222 + 4.4 . 0.7 OECD (x Japan) It l 1,087 1,822 1,920 + 76.7 60 9 a y G 269 471 494 + 83 7 . 16 ermany C d 181 311 335 . + 84.5 .4 11 3 ana a U it d 189 334 264 + 40.0 . 13 8 n e Kingdom 101 169 217 +115.1 . 8.4 * Three largest suppliers of MFA textile and apparel products Source: U.S. Department of Commerce Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 APPAREL AND NON-APPAREL IMPORTS (Billions of Dollars) Country/ Imports Share Of Mark U.S. $ 10.5 $ 12.4 $ 17 2 16.3% 18.3% . 22.9% EEC $ 14.3 $ 13 9 37 6% . $ 14.4 . 39.0% N/A Japan $ 2.8 $ 2.4 $ 3.2 19.7% 19.9% N/A Canada $ 1.9 $ 2.3 $ 2.7 Sources: Import Values: GATT Doc. COM.TEX/W/167 Market Shares: U.S. - Department of Commerce EEC & Japan - Obtained by USTR Geneva Note: While market shares in this table are based on fiber consumption of U.S. mills and the basis for calculation of market shares in tables 1 & 2 is square yards equivalent, both show essentially the same results. Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 Table 9 U.S. APPAREL & NON-APPAREL TRADE OF ALL FIBERS Apparel (Millions of Dollars) Non-Apparel Trade Balan Imports Expo= Imports Exports 1972 1 1,718 198 1,497 745 -1' 520 -752 973 197 1,955 229 1,541 1,164 , -1 726 -378 4 1 2,095 333 1,597 1,704 , -1 763 +107 975 1 2,318 341 1,212 1,533 , -1 978 +321 976 197 3,257 434 1,626 1,855 , -2,822 +229 7 3,650 524 1,765 1,857 -3 126 + 93 1978 1 4,833 548 2,212 2,073 , -4 286 -139 979 1 5,015 ' 772 2,214 3,029 , -4 243 +815 980 19 6,142 1,001 2,645 3,458 , -5 141 +813 81 198 7,253 1,032 3,221 3,474 , -6 221 +254 2 19 7,888 775 2,963. 2,650 , -7 113 -313 83 198 9,308 664 3,399 2,241 , -8 644 -1 158 4 12,963 638 4,790 2,246 , -12,325 , -2,544 1984 198 7,566 380 2,843 1,322 -7 186 -1 522 5 8,228 329 2,977 1,291 , -7,899 , -1,686 Apparel & Non-Apparel Imports 1972 3,215 943 -2 272 1973 3,496 1,393 , -2 103 1974 3,692 2,037 , -1 656 1975 3,530 1,874 , -2 594 1976 4,883 2,289 , -1 894 1977 5,415 2,381 , -3 034 1978 7,045 2,621 , -4 424 1979 7,229 3,801 , -3 428 1980 8,787 4,459 , -4 328 1981 10,474 4,506 , -5 968 1982 10,051 3,425 , -7 426 1983 1 12,707 2,905 , -9 802 984 Jan.- ,ty 17,753 2,884 , -14,869 1984 1 10,409 1,702 -8 707 985 11,205 1,620 , -9,585 Source: U.S. Department of Commerce Imports: 1972-1979 Customs Value 1980-Present C.I.F. Value us exports of textiles and apparel U.S. domestic exports -----------------------------------lE.a.s._value~_So_dollatel_____-__-_- i I 1 , Commodity/Country 1 1980 I 1981 .1 1982 1983 1 1984 --------------------------1--------------1--------------1--- -'L--------------1------------- textile mill productsl I I t I J Canada------------------I 579,209,846 I .623,504,947 I 473.8710069 1 547,070,654 1 509,825,487 Mexico------------------1 145,143,262 t 159,971,411 1 101,373,300 1 85,603,726 1 135,527.476 Saudi Arabia------------I 114,490.830 1 130.000.509.1 152.485,427 1 152,120,054 I 132.097,123 United Kingdom----------1 326.576,282 1 266,408,235 1 156.928.773 I 126.122,074 1 111,411,340 Pelsium and Luxembourg--I 164,814,975 I 123,993,628 1 90,364,342 1 103.340,001 I 99,493,703 1 1 t 1 t Japan-------------------1 95,111,7111 1 106,060,235 1 86,427,714 I 90,120,256 1 94,699,201 Australia--------------- I 126,360,902 1 153,218,459 1 112,600,515 1 78.530,242 186,7200101 German9, West-----------I 117,979,266 1 95,697,453 1 71x539,864 1 61,549,285 I 68,000,221 Venezuela---------------I 69,445,615 I 80,018,893 t 88,768,192 1 39,483,360 1 53,396,143 China-------------------1 128,361,641 I 281,656,037 1 127.526,851 1 17,277,309 t 46,276,854 1 I I I All other --------------- 11a590s058a133_11xd54a02As824_11i1B2&237x421_.L__2d2z542a3.45_1__ 409 046i03O All countries---------13.457.552,533 13,474,154000 12,649,603,468 12.240.767,106 12.245,473,759 ----------------------1--------------1- -1-------- -------------- 1------------- Sourcet Compiled from official statistics of the U.S. Department of Commerce. 09/04/95 us exports of textiles and apparel U.S. domestic exports ------------------------------------ tE.a.s._ualue._io_do1Iacsl_____-----_ 1 I I I i' Commodity/Country 1 1980 I 1981 t 1982 1 1983 1 1904 - ----- 11 1 I i -------------------1--------------1--------------1--------------1--------------1------------- apparelt I I I I I Mexico--------------- 1 153,604,618 1 188,251,175 t 119,8600518'1 95,096,669 I 110,353,751 Dominican Republic------I 50,017,540 1.. 66,049,402 1 64,343,101 1 72,4420250 1 78,192x145 Costa Rica--------------1 26,011,451 1 31,890,823 1 34.450,602 1 48,038,747 1 53.597,031 Haiti ------------------- I .24,579,060 1...24,898,731 I 22,363,215 1 37.334,036 1 44,152,670 Canada------------------1 51,267,371 1 59.419,626 1 52,239,196 1 54,352,427 1 41,762,717 I 1 .. .. t I 1 Japan-------------------1 61,513,356 1 62,065,333 t 43,717,764 t 25,485,011 1 22,650,396 United Kingdom ---------- t 83,117,073 1 05,915,149 I .44,009,417 t 32,211,560 1 20,929,320 Saudi Arabia------------1 11.558,204 I 15.208,302 1 20,036,771 1 20,551,988 t 19,441,0131 Germany, West-----------1 390674,890 1 .370050,508 1 28,752,947 1 23,416,066 1 17,272,945 Netherlands Antilles ---- I 53042.524 1 39,168,425 1 39x966,761 I 20,409,904 1 16,217,332 I 1 I. I 1 All other--------------- I__438s486i526_1__d22s351i583_1__3o5a162t2z7_1__23As333.631_1__20Sa32Ba732 All countries---------11,000,572,733 11r032069,057..1._774r907x969 1 663,742,169 t 637,097,035 ------------=--------1=-------------1--------------1--------------1------- --1------------- Sourcet Compiled. from official. statistics of.the U,B..Department of Commerce. Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 APPAREL & NON-APPARH, PRODUCTION AND APPARENT CONSUMPTION (Millions of Square Yards Equivalent) Apparel Non-Apparel Production Apparent Consume ion Prod ti Apparent uc on Consumption 1972 197 10,762 12,762 13,309 13,296 3 1974 10,244 12,110 13,778 13,475 197 9,910 11,545 13,329 12,740 5 1976 9,378 11,183 12,636 12,280 1977 9,790 11,937 13,619 13,264 1978 10,497 12,638 14,090 13,769 1 10,229 12,780 14,309 14,175 979 1980 10,131 12,311 14,198 13,815 19 9,840 11,688 13,413 12,951 81 1982 9,923 12,246 12,942 12,694 1983 9,729 12,593 11,875 11,810 19 10,135 13,548 12,937 13,468 84 10,086 14,327 13,150 14,124 Compound Annual Change: 1972- 1984 - 0.5% + 1.0% - 0.1% + 0.5% 1980- 1984 + 0.6% + 5.2% - 0.6% + 2.2% Source: U.S. Department of Commerce Note: Imports are for cotton, wool and man-made fiber. Apparent consumption is production of all fibers minus exports plus imports. Non-Apparel data is household and industrial made-up items. Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 Table 12 APPAREL AND NON-APPAREL EMPLOYMENT TOP 10 STATES THOUSAND WORKERS) State Seasonally State 1974 1984 A QR~tgat2nemploi July 1985 North Carolina 349,700 312,500 - 37 200 5 6 Georgia N Y 182,800 180,300 , - 2,500 . 7 ew ork S 253,400 177,100 - 76 300 .3 6 1 outh Carolina 198,900 162,700 , - 36 200 . 6 7 Pennsylvania 209,200 148,000 , - 61 200 . 7 8 California 117,900 123,100 , + 5 200 . 7 7 Tennessee 108,000 94,500 , - 13 500 . 8 7 Alabama 101,400 94,400 , - 7 000 . 9 - Virginia 84,800 76,000 , 8 800 .3 5 8 New Jersey 91,100 66,500 APPAL , 24,600 . 6.0 1974 1984 New York 199,900 145,100 - 54 800 Pennsylvania 149,800 113,900 , - 35 900 California 93,000 109,000 , + 16 000 North Carolina 81,000 92,300 , + 11 300 Georgia 60,200 74,600 , + 14 200 Tenessee 74,000 68,900 , - 5 100 Texas 73,500 62,000 , - 11 500 7 7 Alabama 51,600 55,000 , + 2 400 . New Jersey 62,500 51,500 , - 11 000 South Carolina 44,700 49,700 , + 5,000 Non_ Apparel 1974 1984 North Carolina 281,200 220,200 - 61 000 South Carolina 154,200 113,000 , - 41 200 Georgia 122,600 105,700 , - 16 900 Virginia 45,000 43,400 , - 1 600 Alabama 49,800 39,300 , - 10 500 Pennsylvania 59,400 34,100 , - 25 300 New York T 53,500 32,000 , - 21 500 enessee 33,700 25,600 , - 8 100 Massachusetts 28,300 20,600 , - 7 700 4 3 New Jersey 28,600 15,000 , - 13,600 . Source: Department of Labor Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 U.S. TEXTILE MILL OSINGS Number of Employees 8,650 Plants with permanent layoffs Permanent layoffs 1,160 Total permanent layoffs 9,810 Source: American Textile Manufacturers Institute Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 TEXTILE CORPORATE PROFITS (Millions of Dollars) Rrofits Per Currents Constants cent of Sales Percent of Equity 1979 1 1,340 919 3.2 11 9 980 1981 977 611 2.2 . 8 4 1982 1,157 662 2.4 . 9 4 19 851 487 2.0 . 6 9 83 1984 1,599 896 3.3. . 12 0 1,635 879 3.1 . 11.2 Compound Annual Change: 1979- 1984 + 4.1 - 0.9 1980- 1984 +13.7 + 9.5 Sources: Department of Commerce Constant dollars are based on 1972 as published in 1985 ti S Ind strial OOttoolt Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 WORLD MAN-MAADE FIBER PRODUCTION 5 APA ITY (Thousands of Metric Tons) West Eurooe U.S_ Other Amer- ica's Japan China Taiwan Korea 1976 1977 2,303 2 2,746 541 1,204 52 272 309 8 601 1978 ,155 2 3,037 589 1,280 60 364 350 , 9 149 1979 ,344 3,218 638 1,376 137 464 433 , 10 034 1980 2,382 2 3,484 715 1,363 164 521 477 , 10 601 1981 ,169 3,234 735 1,358 248 558 536 , 10 476 1982 2,297 2 3,276 681 1,327 347 587 610 , 10 827 1983 ,176 2 3 2,603 669 1,304 369 631 612 , 10 140 1984 , 10 2 3,009 716 1,318 400 737 664 , 11 074 1985* ,422 2 2,936 786 1,369 701 866 746 , 11 893 1986* ,978 3 02 3,607 1,104 1,654 1,015 1,055 762 , 15 401 , 2 3,631 1,122 1,654 1,095 1,210 842 , 15,956 Compound Annual Change: 1976- 1984 + 0.6 + 0.8 + 4.8 + 1.6 1980- 1984 + 2.3 - 2.4 + 1.7 + 0.2 1985- - 1986 * + 1.5 + 0.7 + 1.6 0 * Producing capacity, prior to 1985 is actual production Source: Textile Oroanon Note: production if for noncellulosic yarns, monofilaments, staple, tow and fiberfill. Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Table 16 TEXTILE AND APPAREL TOTAL #MPLOYM#NT (Thousand Workers) 1972 1 985.7 1,382 7 973 1,009 8 . 2,368 197 . 1,438 1 4 965.0 . 2,448 1 1 362 6 975 867.9 , . 2,328 197 1 243 3 6 918.8 , . 2,111 1 1 318 1 977 910 2 , . 2,237 1 . 1 316 3 978 899.1 , . 2,227 1 1 332 3 979 885 1 , . 2,231 1 . 1,304 3 980 847.7 . 2,189 1 1 263 4 981 823 0 , . 2,111 . 1 244 4 1982 749.4 , . 2,067 1 1 161 1 983 741.3 , . 1,911 19 1 163 4 84 746 0 , . 1,905 July . 1,196.6 1,943 1985 690.6 Compound Annual Change: 1972- 1984 - 2 3 . 1.2 1972- 1980 - 1 9 . 1.1 1980- 1984 3 1 . 1.3 Source: Textile Mill Products (SIC22) Apparel & Other Textile Products (SIC23) Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 EMPLOYEE CHARAGT RI$TI s Male Female Percent High School Graduates Male Female Percent Percent Women Black 79 P 14 ercent (1984) Hispanic 14 Median Age (Years) 1984 Average Hourly Wage (Source: Labor Department) All Manufac tug Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 Ayrothetical Rollback of U.S. it ana asnrrel InMrta in 1984 Under S. 680 Percent Reduction of U.S. Imports of: U.S. Imports Fran: Textilf-q & Apparel 11~ A rel 26 7 . 30.1 22.6 39A 52.4 28.6 Brazil 80.5 India - 22.2 Pakistan 41.3 Thailand 64.4 Singapore 3.2 Indonesia 89.7 Philippin es 21.2 Peoples' Republic of China 59.1 Korea 35.1 Hong Kong 14.7 Taiwan 47.9 Japan 20.1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 kit SUBSTITUTION OF TARIFFS FOR QUOTAS IN THE MAJOR MARKETS The current system of discriminatory quo* provides a leaky wall of protection for the domestic industry, The repair of which involves repeated confrontations with some thirty supplying nations and the associated uncertainty for producers both here and in our LDC suppliers. The overall effect of this protection is to promote production in relatively inefficient countries (the U.S. and the EC) at the expense of the more efficient. The protection which the domestic industry would receive from tariffs would be more constant in terms 9f,pro4.t margin but (possibly) less predictable in terms of the shsolute volume of imports. (Either more of fewer import might result.) This protection would be additive to the competitive effects of currency movements, i.e., it could be either magnified or offset by them. There would be greater reliability of supply for importers/retailers and, as a result, possibly lower profit margins. There would also be greater competition among foreign suppliers leading to lower export prices, even from the most efficient producers (who had been collecting the greatest quota rents). A likely summary of the outcome on the domestic ledger is that while prices to producers would be generally unchanged, retail prices could be somewhat lower, and collections of import duties would go up quite substantially (i.e., by at least $ 1 billion). The national economic welfare would thus clearly be increased. Likewise, the international political benefits, especially in the longer run, would be considerable. The technical problems posed by an orderly conversion to MFN tariffs as the principal means of protection for the textile and apparel industries in the developed world are substantial. As the discussion below brings out, though, there are a number of ways to approach these problems and the rewards appear sufficient to make the undertaking worthwhile. Current Levels ` Tariffs Industrial country tariffs on textiles and apparel are variable but generally much higher than on other goods. As Table 1 indicates, of the major markets the United ?tea and Canada have the highest tariffs--trade-weighted averages of around 20 percent. Finland and Austria, however, have the highest average duties on the textiles and apparel complex of some 30 percent. These two countries, followed by the United States and Canada, also have the largest absolute disparity between textile and apparel duties and average duties on manufactured imports as a whole, suggesting the highest degree of relative protection. (Although comparable data are not available for Australia and New AA~1~'Ir1r~ r~r . r Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 GYM u^ ^YLff ^ 0 1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 2 Zealand, it should be noted that they also have very high duties--close to 100 percent on some apparel items.) Partly as a result of the high level of duties for textiles and apparel, the tariff structures of the industrial textile trading nations are also c. racterized by a vary high degree of tariff escalation in thi ea, as shown in Table 2. It is notable in the case of the United States that there appears to be negative effective protection on made-up articles and very high duties on fibers, at least when compared to other importing countries. Table 3 gives data on the dispersion on tariffs by level for these same eight importing -ountries which are useful in crafting formulae for additional t ffs, as demoostrated below. For example, given the sensit .ity of the U.S.. garment industry to imports, any tariff formulae would have to preserve, if not increase, the effective protection embodied in our current tariff schedules. One way to do this would be to add uniform increments of duty to those currently prevailing, or larger increments for apparel than textiles, or simply to multiply the current duties by some factor. Another consideration raised by the disparity of current duties would be the effect of possible harmonization of duties across importing markets as a way to increase import flows into those markets which have prohibitively high duties, such as Finland, New Zealand, and Australia. We would want to be careful, though, that the considerable tariff escalation between the fabric and garment stages in the United States not be compromised i h in t e course of item. by item (or group by group) harmonization with other importers. An advantageous approach might be to seek a ceiling on duties at 'prohibitive' levels, arbitrarily defined to accomodate the U.S. tariff structure (and those of the other major traders), but not the truly high-duty countries. Were post-Tokyo Round duties to be doubled, for example, all but 6 percent of U.S. tariff line items would be accomodated by a ceiling of 40 percent a.v.e., while 31 percent of Canadian, 34 percent of Austrian, 79 percent of Finnish, and presumably most Australian and New Zealand tariffs could not go up by their full 'formula' amount. (See.Table 3.) Tariff Equivalents of Quotas While there has been some empirical research in the United States on the question of t:.o tariff equivalent of the quota system in effect on textiles and apparel, it has been limited in scope and is now somewhat dated We d . o not know of comparable work done in other importing markets. Interagency calculations in May, 1985, based on the work of Morkre and Tarr, estimatedthe tariff equivalents of existing C'.S. quotas in 1964 to have been some 12 percent for textiles and 24 percent for apparel, i.e., increments approximately equal to Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 3 NFIIP iTIAL the existing average ta~Orif $ on these product groups. The relative restrictiveness between these two groups is consistent with general expectations. It is also confirmed by data on the relative portions of imports in each group under import control: 43 percent for non-apparel and 80 percent for apparel in 1984. Alternative analytical approaches would produce somewhat different results, but it should be kept in mind that domestic political imperatives and negotiating possibilities will be more determinant of a formula (for the substitution of tariffs for quotas) than the results of any econometric determination of equivalence. Moreover, there is little doubt that the restrictive effect of quotas is by no means constant, such less readily measured. (Quotas are based on absolute numbers rather than market share, will vary considerably by product and over the business cycle. One advantage of tariffs over quotas from the viewpoint of the domestic industry is that they provide a producer of a given product a constant margin of protection regardless of swings in consumer taste or overall demand.) Nonetheless, the 12 and 24 percent figures are useful in providing an order of magnitude and possible point of departure in the search for a means to convert quota protection to tariff protection without adversely affecting domestic economic interests. In an effort to determine which importing markets and products receive relatively more protection under existing quota regimes, one might look at the degrees of utilization of the quantitative restraints involved. In theory, the more restrictive a quota, the higher its utilization. The data do -not support any meaningful conclusions, though. Table 4 slows the decree of utilization of quota by supplier and importe'E over some recent years. These data demonstrate the variable restrictiveness of particular restraints over time and, even more dramatically, the differential restrictiveness across suppliers (for one importer) and across importers (for one supplier). For these reasons and the fact that the structures, mechanisms, and category systems of various importing nations all differ, it is hard to interpret these data in any meaningful manner. Another way to attempt to measure tariff equivalents of quotas across countries would be to make International price comparisons for each of a wide range of comparable products and then adjust the results for applicable tariffs, taxes and fees. This would be a huge technical undertaking which could yield results of limited practical value because of differences in marketing practices internationally, including costs of doing business, among other factors. Prcbatle Trade Effects Substituting tariffs for quotas should result in the maintenance of the existing overall competitive situation for prodjcers in im.pcrting markets. This could be defined in a AAIII-iwa^aNinon . . Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 "a... ^a a^ ^c ^ aAER Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 CONfloTM! number of ways (e.g., in either value or volume terms as import level, import penetration, or trade balance) and at a number of levels (e.g., individual product, product group, or in aggregate). While the overall trade situation would be unchanged, significant adjustments would be expected in other respects, though. The substitution of Mrl1 for discriminatory restraints would presumably result in considerable shifts in sourcing, from DCs and less efficient LDCs to the more efficient LDCs. based on current market shares (in descending order of magnitude), this would make Taiwan, Korea, Hong Kong and China winners and Italy, West Germany, Canada, and the UK losers. The product composition of trade might well change too, although in an unpredictable fashion, due to differential price elasticities of?import demand. This is especially likely where the equivalent tariffs of the earlier quotas are determined for relatively large product aggregates. (Looked at the other way, the earlier subjecting of large categories to quotas created greater distortions of product composition due to upgrading.) Assuming other developed countries were to apply similar MFN increases-in duties in the place of their quotas on LDCs, our exports (largely textiles) to them could be reduced. The overall significance of this side-effect for our industry would of necessity be small because even in textiles only three percent of domestic production is exported to developed countries. (The EC, which exports some $7 billion to developed countries, would face greater difficulties.) we could largely avoid even this minor adverse effect though, if we chose to, by negotiating with our 'Gentleman's Agreement' partners to minimize increases in the rates of duty to be applied to particular products of interest to us. This would be most readily achieved through 'carve-outs' of particular goods, including high-valued products. Duty increases would be on an MFN basis, but our more important two-way trade could be largely insulated from adverse effects. In addition to such agreements, adverse effects on U.S. exports might be offset in part if the more efficient producers of garments (who would be expanding operations) were particularly reliant on our textiles or if they were to provide greater market access. As Tables 5 and 6 show, developing countries maintain even higher levels-of tariff (and possibly non-tariff) barriers to imports of textiles and apparel than do the industrial markets. It would be a reasonable U.S. negotiating request, and possibly a political necessity to sell conversion to tariffs domestically, to seek very substantial liberalization on our textiles from the LDCs. For example, any ceiling applicable to duties by importing nations as discussed above might equally apply to supplying nations. (The suspension of quotas for a particular supplier might be conditioned on such liberalization.) There would be another factor which could compensate our textile producers for any lost sales to other 'Gentleman's j. .., .) Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 5 CONFIDENTIAL Agreement' Countries which might also convert to 'tariffs. Higher U.S. tariffs on garments would increase the incentive to all foreign assemblers to use American parts and enter goods under TSUS item number 807. Implementation Legislation would be needed to imp: .ant the envisioned substitution of tariffs for quotas under U.S. law and presumably in most other textile trading countries as well. Delays and possible complications would be likely but could be accomodated in much the same way that acceptances of the NPA have been spread out over the years and compliance with its provisions has not been uniform or perfect. For example, importing markets might be authorized to maintain (and extend) ex: 'ng quantitative restrictions for some period while the agotiate with domestic interests and foreign suppliers the particular adjustments in tariffs they would make consistent with the agreed formula. Similarly, as discussed above, individual exporters could be denied the benefits of the relaxation of quotas by the major industrial markets until these exporters had taken steps to reduce to some agreed maximum their import barriers on such goods. The problems posed by the legislative process in the United States are always considerable when it comes to trade, but should not be daunting in this instance because, unlike most others, trade liberalization would not be soaght. Indeed, the levels of duty envisioned for the United States are well in excess of those which Congress mandated (in section 504 of the Trade Agreements Act of 1979) to go into effect should quantitative restraints cease to apply. Those members of Congress which have pushed for textile legislation on the grounds that current partial restraints have not been effective might prefer a global tariff approach to a fine-tuned discriminatory system. The considerable revenue raising potential of the tariff approach and related capture of the existing foreign quota rents (as well as the profit-paring effect on importers/retailers) would be strong selling points. Most of Congress' concerns with effective and fair enforcement of the current-system (including release from embargoes, origin determinations, transhipments, overshipments and prior visa approval) would also be made moot by the conversion to MFN tariffs. Customs staffing and other resources dedicated to the complex operation of the textile prograr could be redirected to other projects. For a proposed tariff increase to receive legislative approval here and in other importing markets, it would have to meet the particular needs of especially import sensitive or politically important sectors. Rather than rigidly applying a tariff formula across all items, we might want to to increase duties by sorre trade-weighted average while retaining the freedom on-trinruTI A i Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 C mHRnrxnu to spread the burden across products as we wish. This would of course be a complicated process but well worth the effort in view of the economic and international political benefits of this approach which would accrue as long as it was in effect. Similarly, both mport-competing industries and exporting interests will die# it the calculations which would underly the conversion to taring and want to be able to make considerable adjustments in the tariffs on the basis of market results after the initial conversion. This would constitute a very natural safeguard against unforeseen developments or the unpredictability of the effects of a tariff system presumed by many in industry. For example, if import penetration were to rise (or fall) more than a certai: ?'ireshhold from a base period, uncompensated adjustments in the c'?_E.y would be provided for. Building on the illustrative figures mentioned above, after doubling existing tariffs an increment (or decrement) of say 10 percentage points might be allowed were the market results'to indicate the tariffs for a particular product provided significantly more or less protection than the earlier quotas. Alternatively, only compensated adjustments might be allowed, but they could be of much larger degree and more permanent. The final implementation of a conversion to tariffs could be linked to a new trade round if we wished to try to use it as a carrot to induce LDC support or, alternatively, it might be formally agreed that the results of the conversion would be exempted from future multilateral tariff concessions for a decade or so to increase its saleability to import competing industries. Presumably no Article 19 actions would be allowed for textiles and apparel until after subsequent tariff cuts were made in a m ultilateral round, or possibly even until cuts were made to levels though,bthewconversiior.otootariffslevels. couldlmark all other hreturnrespects, full application of GATT rules to this sector. UNFIDENTIAt Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Table 1 m.-i KM 610 POPS-TORO X10 non DI u01Q UEVMDM 61Wi-S 0%2 1 adha 1o"@ ___ PO but 1b Pon %CCUaa (rel. tam) and elathhe -w a'', a 214 14 U1, is 11y it 101, - 1 , 14, 14 la-j 14 la, ftnxfwtL&w (.ml. p.bolt.) 1,L16ltad ..es 7 S Lls , rs 10 34 ab 6 & is a-mw IN L3 11 6-, 1y 6- Amtris Phaffi d _ _ bdtzerlwd He Port he Pere PM Pbat Re Pcot leailaa (anal. forts) and elottdaa 1ki*+tad mumcqp i1le ahw is, VIA. ..L lb 110h 29 30 la U u' 12 10y a ay 6Ay PhMsfacnave (MM I. P.c:ol av 16Vrcad - 1~s 125 7y 6 6 6h Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 I aeaagra.) atlela, 5 V 5 V a V a ? a V aefin.e ama Pee A 7 134 1411 19 16 19$ LVi 36 27 1bt 3 34 a 9 11% 11k u, 7b 1* 20, cu.ea Pt. 3 4 Ws 16 21 A 10 23 - 23 2% 9ba 2 3 9 . 13 341 214 14 n 210 36 apo rr. 4 4 9 7% 12 x011 13 1W 1? V% 1b.t 3 k 7 A 01 r, of 11h 13 14 Iie 3 11 7 a 13 W1 13 111, 16 101 P t 3 4 3 7 9% 104 9 711 121, 134 A mere. he A 0 a v, 26 V 22 29! 32 37 hrt 24 0 64 7 21% ? A 19 221, 301, 37 9lnlard he 3 4 10 6% 304 !9 27% 22 41 404 Pmt 14 4 94 61y 30 304 364 19 394 39 Sr.d., he 2 4 a4 94 u4 14 11 Pt 144 14- Pmt 14 4 64 74 13. 13 10 a l4 14 avit.wlmd he 24 0 5 4h . a4 1016 a 4 114 u4 hart 2 0 4 Ps 64 A 64 34 9 11 IYdttp AttltL. he 3 0 4 4 17 164 A 1a 224 22 POW 24 0 4 ? 16 134 16, 17 '0 214 lb.t A 54 4 94 11 214 114 17 1as 47 304 ? 3+1 4 7 104 ,44 11 134 164 Sus 454 Em ____ Ibst 0 0 7 a4 21 .154 224 11 774 96 a?dchipLwINew; Y?Ads by NW UPWu. A ? all owiE6 a ? arhdsr; aielttmal &flS ~e m Lpvet. &or. !as gnaw. Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 Taal. 3 ?O19WOMM 1' Mars a mans 00 Q=C W S lVva.fl AWS United 6taew d_l. - C C? 3 4 13 w 6 6 3 6 0.1 - S.aa 6 6ss 165 2 0 t 5 7 5 5 6 5.1 - 10.OS .65 to% 41 7 10 11 25 6t 14 17 293 10.1 -15.01 93 gds 16 6 ' 21 27% 33 33 265 25 A 15.1 - 20.01 31% 17 165 33 12% 234 IS 9 395 49 0 2A.1 -25.(M 19 135 4 36 A 36 IS 1 14 1 0 Orw 252 lds 2a 2 11 0 13 1 0 1 0 0 (c) e) (c) (!) (c) Fm 19 193 3 3 65 6 l l 0.1 - 5.02 5 61S 25 25 65 6 45 - 53 3.1 - IO.OS 6 12 9 16 2+6 25 29 10.1 - 15.01 125 IS 4 4 . S2'1 31 I6 Ids 15.1 - 2a.02 115 13 2 2 175 10 6 a 30.1-25.09 Ids 16 65 4s 5 5 2 2 Oeur am 335 is 76 765 5 5 3 5 pn4 mud bud; PC*-takro bud; c PM-U40 bud. 6.o- a tlw ala,Ltia" rae d2o reria..e7 bud adtad &Mty ftn IMM. du ttpea In eo1ai (,) a a cia espa+b1m d& dw f1 n In mlass O) and (e). Sanitized Copy Approved for Release 2010/11/10 :CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Tla as' 'hble 4 F u" t . Cl TSIMG R 81U 2CTm ?LTflC COOrIUZS' I= TIR 1 njc 1979-1982 (hrtaat~s) 4 83 $4.1 90.1 90.8 uc states . 9 76 66.4 67.7 73.8 Canada . 2 68 63.8. 59.6 . $2.6 mc . 93 4 73.0 78.0 75.2 natsad . 69.4 94.6 torn. en. of 1 77 85.0 9S.3 87.3 patted state. . 9 6 $7 71.2 2 62 42. . Canada . 5 0 70 61.7 0 73 69. . 11t . 36.7. 43.0 34.6 Finland 9v.den 84.5 83.0 71.6 Mateo 86 7 79.7 $4.7 81.4 United State. . 1 36 56.6 53.1 73.3 . 66 6 Canada 4 67 61.1 . 74.0 . 65 6 SC 1 73 80.3 . 51.6 . 0 87 Finland sued" $9.6 93.0 $9.2 . SinsaPor. 33 4 61.3 66.1 United States 54.6 3 35 . 39.9 33.7 43.6 Canada . 9 69 63.2 32.6 40.2 u . 24 9 16.8 0.0 Vinland Iv.den . 101.6 92.3 Sri Lanka 61.2 $0.6 83.3 United State. 2 56.3 41.6 6 44 69. u . 69.7 Via land Sweden 89.5 85.6 7Lailand 73 4 92.0 77.3 70.2 . 3 33 gaited State. 65 3 45.0 . 127.6 . 6 74 Canada 4 107 74.6 . $1.6 . 0 35 SC 9 79 95.4 $2.7 . Vinland . 107.4 96.4 69.6 M4.0 Ldaaeiia 100.0 gaited states 74.1 72.5 Malaysia 3 73 74.9 79.7 87.3 gaited state. . 43.0 50.7 82.0 Canada 65 6 63.3 $6.9 $1.0 SC . 70.2 36.9 98.3 Vinland widen $3.5 93.7 India 78.1 67.0 80.9 United State. 61.6 65.5 45.0 Canada 4 71 62.0 31.6 66.6 . 7 49 u 9 72 56.1 36.6 . Finland Widen . 97.0 91.9 93.3 63.6 Sanitized Copy Approved for Release 2010/11/10 : CIA-RDP87M00539R002303830009-1 Sanitized Copy Approved for Release 2010/11/10: CIA-RDP87M00539R002303830009-1 Table 6- IDO.! AR7ACt QUOTA 0;1ilzsT208 IATtt IS Ti yn C MMENC ST SBJCTU) $DPPLT731C COOif LUO Rlt nfl DOOtTDX CMWMtS 1979-1982 (emati?sed) t (percentages) Pakistan Vatted states iyeada 97.1 103 3 44.3 n'f 39.7 11 . 102.7 97.3 108.0 8s?den 33.6 77.9 60.0 M.3 51.1 70.8 79.0 Dotted states Ceases 37.3 >.6 634 13.6 W 69.3 50.6 67.3 47.! Sweden 73.4 86.7 76.3 66.2 Brasil 91.1 59.4 79.3 United State. 8C 23.1 . 61 7 17.4 39.3 39.8 Sweden . 36.3 47.2 13.3 Colombia 54.1 49.1 United State. 36.2 36.0 71 9 46 Sc lezico United States u 8ulgarL 64.7 36.9 33.1 73.4 71.6 30.4 . 35.3 36.0 5.1 .9 33.? 33.9 6.0 Canada 46.1 23.8 11 1 33 0 42.3 /S ] . . Cs.choslovskia . 33.6 32.7 Canada 8C 102.0 70.3 60.3 69.3 Canada 8C 168.8 37.0 3.0 73.0 Pol and Dotted States Can d 34.7 20.2 33.4 32.8 39.5 28.4 32.3 24.2 a a iC 78.4 32.6 31.2 31.3 68 2 31 g i Ds.ited states . 44.3 .9 39.7 13.3 78.3 32.9 64 4 Canada 3C 19.6 134.6 37.9 . 33.0 Tuge?la'is Rite! Stated B d 37.0 16.1 46.3 0.8 39.7 0.4 30.0 1.9 a en Chian 82.8 W .7 73.8 - 73.3 listed states C d 87.1 91.3 77.7 ana a 149.8 99.1 113.1 61.2 ? sa-P171a8 countries heve been included is this table vtw n they have a restraint with more than ens of the five importing areas for which quota utilisation data have keen received. The above data are of limited comparability in tens of quote definitions. product categories and time period. covered. They should be taken therefore ?a only rough indications of the relative performance of supplying countries in the five import market.. 0 QOV