The abolition of textile quotas in 1 January 2005 has ushered an era of free trading with fair competition. The globalisation of the textile market not only has long-term benefits but also drives the development of the industry.

The abolition of the quotas saw a drastic surge in China’s textile exports. On 13 May 2005, the US government decided to implement special quota policy on China imports of cotton trousers and knitted shirts, and cotton and fibre-made underwear. The European Union (EU) is also following suite by conducting an investigation on setting quotas for nine types of China’s textile products.

The Ministry of Commerce of the People’s Republic of China believes that there are a variety of reasons for the surge in quantity and the drop in China’s textile product prices. First, the US and Europe seem to be over-protecting their domestic textile industries. Before the cancellation, the US and the EU keep 90% and 70% of their respective quotas until the end of the 10-year transition period. So what was initially intended to be a gradual process to liberalisation has now turned into a sudden shake at the end of the transition period.

Secondly, under the quota system, the supply and demand of the global textile products were seriously distorted. After liberalisation, exports from several countries were no longer curtailed, leading to a surge in exports.

Lastly, under the free trading system, the elimination of costs related to quotas has resulted in a drop in textile product prices.

In fact, the increase in export of China’s textile products is closely related to foreign enterprises in the mainland, including those that have been invested by the US, the EU, Korea and Japan firms. The export of textile products from these foreign-invested enterprises amounts to one-third of the total export quantity. Seventy percent of the increase in export after the cancellation of quotas were also from these enterprises. Setting quotas on China’s textile products will have an adverse impact on the brand owners, retailers, foreign-invested enterprises in China, textile machinery suppliers, textile raw material suppliers as well as consumers.

In order to ensure a smooth transition, the Chinese government has implemented a series of measures, including lowering the rebate rate for the export of China’s textile products, imposing export duty on certain textile products, lowering the rate of import tariff, enhancing the protection of intellectual property, and enhancing negotiations among the governments in the textile trading regions, the industries and the enterprises.

Impact on Hong Kong traders

The Customs General Administration of China announced in December 2004 that the globalisation of textile products will commence starting from 1 January 2005. To ensure the stable development of textile trading all over the world, China announced it would impose export duty on certain textile products from 1 January 2005.

At a meeting held in May 2005 with Hong Kong Government officials, the Mainland government has agreed to exempt Hong Kong textile and clothing products imported to the mainland for OPA from the export duty measure.

To help facilitate these policies, Tradelink will launch a new electronic service for customers to apply for the Outward Processing Arrangement (OPA) export duty exemption.

Electronic OPA service

The eOPA service provides functions for use by manufacturers for the purposes of applying exemption from textile export duty measures imposed by the mainland when such products are re-imported back into Hong Kong under OPA. Through Tradelink’s web interface, a manufacturer with a valid factory registration prepares, sign and submit to Trade and Industry Department an electronic application for issuance of OPA Certificate.

Upon the validation of the application, the Government will send back an Acceptance message to the applicant via our online system through which manufacturer can print the approved OPA Certificate after receipt of Government acceptance message.

For registration or enquiries, please call Tradelink Sales Hotline 2599 1700.