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Viewing cable 05PRETORIA1365, PROTECTION SOUGHT FOR THE SOUTH AFRICAN

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Reference ID Created Released Classification Origin
05PRETORIA1365 2005-04-06 05:03 2011-08-24 01:00 UNCLASSIFIED Embassy Pretoria
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 PRETORIA 001365 
 
SIPDIS 
 
DEPT FOR AF/S; AF/EPS; EB/TPP/MTA 
USDOC FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND 
COMMERCE ALSO FOR HVINEYARD 
TREASURY FOR BRESNICK 
DEPT PASS USTR FOR PCOLEMAN 
 
E.O. 12958:  N/A 
TAGS: ECON ETRD KTEX SF USTR
SUBJECT:  PROTECTION SOUGHT FOR THE SOUTH AFRICAN 
APPAREL AND TEXTILE INDUSTRY 
 
REF:  (A) PRETORIA 448 
 
      (B) 2004 PRETORIA 4527 
      (C) 2004 PRETORIA 4428 
 
1.  Summary.  While Chinese and Indian apparel and textile 
exports to the United States continued to surge in the first 
month after the ending of the multi-Fiber arrangement, South 
African exports of these products (section 11) to the United 
States showed a 17% decline.  A DTI official said the flood 
of cheap Chinese imports into South Africa had devastated 
the local industry and openly declared support for the 
introduction of safeguards to protect the South African 
clothing, textile and footwear industry. South African 
textile industry officials outlined their case for using 
various options for protection, namely higher tariffs, 
safeguards, anti-dumping duties, and an indicative pricing 
system for import valuation.  End summary. 
 
2.  As expected, the January 1 lifting of import quotas 
with the ending of the 1974 Multi-Fiber Arrangement produced 
a sharp increase in textile exports from China and India at 
the expense of smaller producers in developing countries. 
According to the United States International Trade 
Commission the total value of Chinese and Indian apparel and 
textiles exports (section 11) to the United States increased 
respectively by 31% and 8% in January 2005.  At the same 
time South African apparel and textile exports (section 11) 
to the United States declined by 17%.  Apart from the 
lifting of quotas, the strength of the South African rand 
against the dollar contributed to the state of affairs. 
Adding to the pressure, South African imports of Chinese 
apparel and textiles products increased respectively by 76% 
and 35% in 2004. 
 
3.  Mr. Lionel October, deputy director-general of the 
Department of Trade and Industry (DTI), said on March 10, 
2005 that the South African government would support the 
introduction of safeguards to protect the South African 
clothing, textile and footwear industry from the flood of 
cheap Chinese imports that have devastated the industry over 
the past four years.  He said that the report of the 
Technical Task Team, consisting of representatives of 
government, industry and labor to investigate and find 
solutions to the crisis, was being finalized.  The Textile 
Federation of South Africa (Texfed) expects the findings of 
the task team and a possible introduction of safeguards to 
be discussed at the next Technical Task Team meeting, 
scheduled for April 5, 2005. 
 
4.  In the past the South African government was of the 
opinion that the only lasting solution to the industry's 
problems was to find new world market opportunities, to 
improve their productivity and become more competitive. 
According to Helena Claasens, economist at Texfed, there are 
a number of options available to protect the domestic 
textile and apparel industry, namely higher tariffs, 
safeguards, anti-dumping regulations as well as the adoption 
of an indicative pricing system for import valuation. 
 
Tariffs 
------- 
 
5.  Helena Claasens of Texfed feels that the DTI does not 
have too much room to maneuver in terms of an increase in 
customs duties, as South Africa's import duties on textiles 
and apparel are very close to the bound rate.  The bound 
rate is the maximum tariff rate a country may apply without 
breaching WTO obligations. 
                            SA Applied rate   Bound rate 
                            ----------------  ---------- 
Apparel                          45              40 
Household textiles               30              30 
Fabrics                          25              22 
Yarns                            17.5            15 
Some Fibers                      10              7.5 
 
Safeguards 
---------- 
 
6.  Although the DTI has now openly declared itself in 
favor of the introduction of safeguards to protect the local 
industry, a formal complaint will still have to be lodged by 
the industry, where they would have to supply evidence to 
prove serious injury to the South African textile and 
apparel industry.  Texfed is confident it could prove the 
following: 
 
-  A surge in Imports.  This can easily be proven given that 
Chinese apparel and textile imports to South Africa grew by 
51% in 2002, 34% in 2003 and 61% in 2004. 
-  Unforeseen circumstances.  Industry perceives the 
appreciation of the local currency as unforeseen. 
-  Material injury.  The closure of 24 factories since July 
2002 and the loss of 30,000 job opportunities during the 
past two years should be enough prove of material injury. 
China, on the other hand, has cautioned countries against 
any hasty implementation of safeguards to restrict textile 
exports.  According to Sun Huaibin, spokesperson for the 
China National Textile council, quotas were removed on 
January 1 so that trade can be freer, and any restriction on 
trade would therefore run counter to free trade principles. 
Anti-dumping 
------------ 
 
7.  Texfed is optimistically looking at anti-dumping as a 
protection option, especially in the case of ready-made 
products like clothing, curtains and duvets.  In the case of 
anti-dumping, industry would have to prove that Chinese 
producers export their products to South Africa at a price 
lower than their normal value (domestic selling price), 
thereby causing material injury to the South African 
industry.  According to Texfed there is enough evidence to 
prove dumping.  First, Chinese textile and apparel are 
exported at a much lower price to South Africa than to the 
United States.  Second,  yarn and fabrics are imported at 
higher prices than the ready-made products.  To support the 
previous statement Texfed supplied the following import 
prices as examples to embassy's economic specialist. 
 
Product                Import price (fob) from China (R/KG) 
-------                ------------------------------------ 
Ready-made knitted curtains                    2.25 
Ready-made woven curtains                      3.51 
Nylon fibers                                  14.60 
Polyester fibers                               4.44 
Yarns                                         15.64 
Knitted fabrics                               24.51 
Woven fabrics                                 23.51 
 
Towels (of terry fabrics)                     13.73 
Cotton fibers                                 10.00 
Cotton yarn                                   16.82 
Terry fabrics                                 25.61 
 
Indicative Pricing System 
--------------------------- 
 
8.  Industry also wants the South African government to 
adopt an indicative pricing system for import valuation, 
instead of the World Customs Organization's valuation code 
that South Africa adopted.  The code sets global standards 
for charging duties on declared imports.  Using an 
indicative pricing system means that if, for example, the 
indicative price for a particular garment is R40, and an 
invoice says that particular garment is worth R5, meaning 
the garment's price does not conform with the indicative 
price, such a garment would be prevented from entering the 
country.  At the moment it does not seem that the South 
African Revenue Service (SARS) is very eager to change to an 
indicative pricing system.  By using the import valuation 
procedures, SARS complies with World Customs Organization 
(WCO) rules. 
 
FRAZER