Pakistani tariffs challenged

Marvin Lazaro, November 12, 2001

In an effort to help bolster its suddenly sagging business, the Pakistani textile industry has urged the Bush Administration and the United States Congress to eliminate duties on imports, a proposal the administration had already seemingly endorsed and which has American textile manufacturers protesting en masse.

The Pakistan Textile and Apparel Group (PTAG), an association of Pakistani manufacturers and buyers for U.S. companies, formally requested that President Bush suspend tariffs on Nov. 7. The request had come as a result of a study conducted by a group of 14 apparel manufacturers which found that orders for goods to be manufactured from Dec. 2001 to Feb. 2002 had dropped by 64 percent, from 8.3 million units to 3 million, and that employment had dropped 32 percent, from 16,000 to 11,000, as compared to a year earlier. The textile industry is Pakistan's largest industrial sector and employs approximately 60 percent of the country's work force.

The United States currently imports more than $350 million worth of home textiles from Pakistan, with the vast majority being bed linens, which accounts for $177 million.

The decline in orders by U.S. companies apparently stems from the uncertainty about the timely shipment of orders given the U.S. bombing of neighboring Afghanistan.

"Pakistan desperately needs tariff relief for our industry to survive," said Aleema Khan, a spokeswoman for the PTAG, in a statement released by the group. "Giving Pakistan the relief we are seeking will not harm the U.S. textile industry. It will not create additional business. It will only help bring back the business we had before."

According to Rory Davenport, the PTAG's U.S.-based spokesman, the United States' proposed offer to raise quotas in addition to its backing of the International Monetary Fund and the World Bank's plans to loan hundreds of millions of dollars to Pakistan is not enough. Pakistan and, by extension, its textile industry needs the import duties lifted, Davenport contended, in order to entice companies to keep their business in Pakistan.

"The group understands why U.S. industry is concerned, but they believe that if orders are pulled from them [the PTAG], they're not going to go to U.S.-based companies anyway," Davenport told HTT. "So, they're not seeking assistance that would jeopardize the U.S industry. At best, they believe that lifting the duties will enable companies to continue to do business with Pakistan and enable them to get back to pre-Oct. 7 volume, which is when the bombing in Afghanistan began."

The belief or perception that timely shipments are not possible due to the U.S. bombing is also incorrect, Davenport insisted. Production has been uninterrupted, he maintained, and both seaports, Karachi and Bin Qasim, and the six airports are operating normally. The slack left by any foreign-flag carriers that opted to no longer make the trip to the Asian country has been picked up by Pakistan International Airlines, the country's official airline.

The Bush administration had also proposed to eliminate the duties on Oct. 29, seemingly in a move to mollify the Pakistani government, which is seen as a crucial ally in the U.S. war against terrorism that was declared in the wake of the Sept. 11 attacks.

The European Commission had already announced on Oct. 17 a number of incentives for Pakistani businesses, namely the removal of tariffs and an increase in quotas for textiles and clothing. In return, Pakistan promised improved access to its markets for European Union clothing and textile exporters.

Predictably, U.S. textile manufacturers are not happy with either the Bush administration's or the Pakistani proposal and are making their voices heard in Washington.

"It's wholly unwarranted and it doesn't add up," Charles Bremer, director of international trade, the American Textile Manufacturers Institute (ATMI), said in response to the PTAG's request. "This is a really shameful attempt by some people to make a fast buck on the graves of 5,000 people in New York and 200 in Washington."

Bremer said the contention by the PTAG members that they have been laying off workers on the basis of the lack of orders is "completely phony," since workers should currently be working on orders placed at least two months ago. He also questioned how workers can be laid off now due to a lack of future orders which had not yet been placed and therefore could not be measured.

"There should be no duty cuts, period. None. They are not justified," he said.

According to Bremer, the National Cotton Council, Textile Distributors Association, Knitted Textile Association, Northern Textile Association and American Yarnspinners Association have all joined with the ATMI in its opposition.

When the proposal, which is currently in the form of a bill, does make it to the floor of Congress for discussion, Bremer said the representatives from the textile producing states of the South, Georgia, Virginia and the Carolinas will be sure to voice their strong opposition.

If the bill is passed, it is in effect giving Pakistan a "blank check," said Bremer, "and establishes the precedent for other Asian textile producing countries, such as Bangladesh, Turkey, Indonesia and, most notably India, to ask the United States for the same concession. Another, far more devastating result would be the inability of American manufacturers to compete; Pakistani prices, already aided by the weak strength of the Asian stock markets, would fall further, at which point "you'd see American mills shutting down," he said.

As an alternative to lifting the duty, Bremer proposed re-instituting the Generalized System of Preferences (GSP) program for Pakistan, which does allow for zero duty on various Pakistani imports, such as as soccer balls and surgical instruments, but not for textile and apparel products. The GSP was discontinued by the United States in response to Pakistan's ongoing conflict with India and both countries' announcement several years ago that each had nuclear arms capability.

Asked to sum up in his feelings about the proposal to eliminate the tariffs, Bremer replied, "The words I want to use you can't print. Let's just say, for now, 'disingenuous.'"

U. S. home textiles imports from Pakistan, 1996-2000
(all figures in $thousands)

1996 1997 1998 1999 2000
Source: U.S. Customs Service, U.S. Census Bureau, U.S. International Trade Commission and Home Textiles Today market research.
Bed linens $51,188 $66,446 $105,203 $154,293 $177,134
Towels 60,848 64,647 80,956 76,587 87,283
Kitchen/bath linens, other 35,445 38,058 44,353 46,410 61,836
Table linen 5,148 5,308 11,584 13,835 14,087
Other home textiles 2,401 3,026 3,911 7,068 7,104
Curtains/drapes/valances/blinds 129 197 559 706 3,160
Pillows/pillow covers 74 31 97 522 1,639
Curtains & drapes, of plastic 0 0 0 440 1,130
Wall hangings 2 1 0 6 1
Total Pakistan $155,235 $177,714 $246,663 $299,867 $353,374
TOTAL WORLD $1,946,131 $2,361,086 $2,905,431 $3,366,438 $3,975,778

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