TOH HAN SHIH

Washington is developing detailed procedures to determine whether to impose quotas on Chinese textiles based on the "threat" of market disruption - a controversial policy criticised by Beijing as well as industry players on both sides of the Pacific.

"We are in the process of developing clarifications to issues related to the `threat' of market disruption so everyone will know what the rules are going to be," said James Leonard, a deputy assistant secretary for textiles, apparel and consumer goods in the United States Department of Commerce.

He also said he did not know when the rules would be finalised.

The US last month shifted the basis for safeguard measures to the threat of disruption from "actual" and already has six petitions pending under the new definition.

Mr Leonard, who was in Hong Kong yesterday following a trade delegation to Beijing, said US interests had asked for safeguard quotas for cotton yarn and manmade fabric, and more petitions were possible this year.

The US government will decide within two weeks whether to consider the new petitions and if it does consider them, it will make a final decision within a further 90 days on whether to impose quotas.

Despite the impending end of global textile quotas in January, the US and other World Trade Organisation member nations are entitled to impose one-year safeguard quotas on Chinese apparel items that threaten market disruption.

"We decided it won't be fair to deny petitions based on threat though the procedures of threat-based quotas are not clarified," Mr Leonard said.

The six apparel items already the subject of petitions are cotton knit shirts and blouses, non-knit shirts, manmade fibre knit shirts and blouses, manmade fibre trousers, cotton and manmade fibre underwear, and cotton trousers.

Mr Leonard admitted that threat-based quotas were "new ground for us. `Market disruption' is not specifically defined, neither is `threat'".

Critics argue imposing quotas based on threat is a nebulous process, since there is no hard data from actual market disruption to justify it.

"The Chinese government gave me a letter objecting to the actions we are making on threats. The Chinese government made the point this is not good for our bilateral relations. We strongly feel we are entitled to do that," Mr Leonard said.

The US and Chinese governments also "have strong disagreements" on whether the US could renew a safeguard quota after it expired, he said. "The Chinese interpret the WTO rules as we can't reapply. We say we can."

Three one-year US safeguard quotas on Chinese brassieres, dressing gowns and knit fabric would expire next month, but so far the US government had not received any petition to renew them, Mr Leonard said.

In deciding whether to impose quotas, the US government would listen to all views, including those of mainland companies and US importers which opposed the quotas, Mr Leonard promised.

"I've had Chinese companies tell me they've quit receiving orders from the US till April because of the uncertainty over safeguard quotas. Our US importers want certainty. There is significant concern if a US importer places a huge order, we put safeguard quotas, they don't get their products," he said.