US-CHINA TEXTILE NEGOTIATIONS: THE FIFTH ROUND

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R000400820002-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 5
• Document Creation Date: December 22, 2016
• Document Release Date: July 22, 2010
• Sequence Number: 2
• Publication Date: March 4, 1983
• Content Type: MEMO

Sanitized Copy Approved for Release 2011/03/15: CIA-RDP85T00287R
Central Intelligence Agency 25X1
Washington. D. C.20505
DIRECTORATE OF INTELLIGENCE
4 March 1983
US-China Textile Negotiations: The Fifth Round
We believe the Chinese are not yet prepared to make major
concessions to gain an agreement in the upcoming fifth round of
textile negotiations. According to textile negotiator Li
Dengshan, the Chinese want successful talks, but are willing to
compromise only if encouraged by significant US concessions.
Declining oil prices may be putting additional pressure on China
to reach more favorable terms for its textile exports.
US and Chinese negotiators will meet in Beijing beginning 11
March for a fifth round of talks to renew the bilateral textile
trade agreement. Preliminary meetings have created an atmosphere
of uncertainty. It is unclear exactly how the session was
scheduled, but China mistakenly interpreted the US team's pending
arrival as an indication of new flexibility. Li, apparently
concerned that neither side is yet prepared to make necessary
further concessions, told US Embassy officers that that a fifth
round could be "unfortunate" unless both sides are willing to
compromise.
The Chinese Position
The Chinese position has not changed since the January round
of talks. Li acknowledged that China might be willing to show
additional flexibility, but the United States must first make
concessions. Beijing's principal areas of concern are:
o The number of categories the United States wants to
include in the quota system. The United States wants 32
categories covered, China is willing to consider no more
than 28.
This memorandum was prepared by
Division of the Office of East Asian Analysis.
EA Psi 83-10041
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o The base levels from which export growth rates will be
calculated. China wants base levels and growth, rates
considerably higher than the United States.
o Reduction in the volume of printcloth exports requested
by the United States in order to better regulate growth
in that category. Chinese printcloth exports jumped 65
percent in 1981,, but quotas cut 1982 sales back to nearly
the 1980 level.
Pressures on China
The recent drop in oil prices may he putting additional
pressure on China to try to reach highly favorable terms for its
textile exports, which could take on added significance after
1983 if oil prices do not recover. For each dollar-per-barrel
drop in the world oil price, China will lose about $100 million
in annual revenues. This is not'an immediate problem because
China's foreign exchange position is strong and current oil
export contracts extend beyond mid-year.* At current export
levels, a 2 percent increase in textile sales would be required
to offset a $100 million reduction in earnings from oil exports.
The ambitious import program contained in China's recently
published Five Year Plan (1981-85) underscores the importance of
textile and apparel sales. Exports of these goods account for
nearly 25 percent of exports. In order to finance import levels
projected for the Sixth Five-Year Plan, Beijing must expand total
exports to about $27 billion by 1985, a 2 percent growth in 1983
and an implied 11 percent per year for the following two years.
Beijing hopes that textiles and apparel will account for a large
share of that growth and must negotiate textile trade agreements
that will accommodate that goal. The negotiations with the
United States will set a precedent for future negotiations with
the EC and perhaps for renegotiation of the Canadian agreement,
thereby taking; on added significance.
Trying to Pressure the US
China has tried to pressure the United States into greater
flexibility by threatening to cut off purchases of textile fibers
and other US goods; the threat followed Washington's imposition
of unilateral controls on textile trade after the unsuccessful
fourth round of negotiations. To date, this tactic has had
little effect on trade, because purchases in most of the
categories had already fallen off for economic reasons -- China's
record cotton crops and synthetic fiber stockpiles, for
example. The unilateral controls, however, are already beginning
to constrain China's exports, probably adding to the concerns of
* China currently exports 350,000 barrels of oil per day.
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the Chinese. Two categories which together represent 6 percent
of 1982 sales to the United States (measured in square 'yard
equivalent) -- wool slacks for women and girls and cofton
sweaters -- have already been embargoed
Offering personal observations to US Embassy officers, Li
expressed consternation that the threats to stop grain purchases
have not evoked more response in the United States. The Chinese
had, however, already ceased purchases for the current crop
year. Althoucrh reduced purchases in the drain markets are
possible in the long run, Canada and other potential suppliers
are also experiencing textile trade discord with China and are
expected to be less flexible in their negotiations than the
Prospects
We believe the Chinese are not yet prepared to make major
concessions to gain a textile agreement in the absence of major
movement on the part of the United States. Li indicated the
Chinese will accept 3 to 4 percent in overall growth and we
believe they may accept as little as 2 to 3 percent.
accepting cutbacks
permitted in other
hold out until the
and base levels.
China might consider
in sensitive categories if sizable gains are
categories. Nevertheless, we expect them to
United States offers concessions on coverage
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CONFIDENTIAL
25X1
25X1
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SUBJECT: US-China Textile Negotiations: The Fifth Round
Distribution:
National Security Council
1 - David Laux, Senior Staff Member for China, Taiwan
and Hong Kong
Department of State
1 - Honorable Paul Wolfowitz, Assistant Secretary for East Asian
and Pacific Affairs
1 - Thomas Shoesmith, Deputy Assistant Secretary for East Asian
and Pacific Affairs
1 - William Rope, Director, Office of Chinese Affairs
1 - Richard Mueller, Office of Chinese Affairs, Bureau of East
Asian and Pacific Affairs
1 - Lorraine Takahashi, Office of Chinese Affairs, Bureau of East
Asian and Pacific Affairs
1 - Priscilla Stowe, Office of Economic Analysis, Bureau of
Intelligence and Research
Department of Treasury
1 - Patsy Haas, Office of East-West Policy
Department of Commerce
1 - Walter Lenahen, Deputy Assistant Secretary for
Textiles and Apparel
1 - Robert Perito, Chief, China Office, East Asia and Pacific
1 - Nai Ruenn-Chen, China Office, East Asia and Pacific
Department of Agriculture
1 - Charles Liu, International Economics Division, Economic
Resen.rch Service
US Trade Representative
1 - John Ray, Assistant US Trade Representative
1 - Ambassador Peter Murphy, Chief Textile Negotiator
1 - William C. Triplett II, Director, East-West Affairs
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Central Intelligence Agency
DDI
Executive Director/DCI
NIO/EA
D/NIC
PDB
D/OEA
Chief/Production/OEA
Chief, China Division
OCR/ISG
CH / DOM
CH/DEF
CH/FOR
CH/DEV
OCO/IMB/CB
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