The recently signed bilateral trade agreement between United States of America and China on textile and clothing trade is significant to all involved in the business. Possibly this is one of the longest negotiations that any country had for limiting textile and clothing export. This definitely indicates the level of complexities arising out of the demands or expectations both the negotiating nations had on paper. Although it took seven rounds of marathon talks before the Chinese Minister of Commerce Bo Xilai and US Trade Representative Rob Portman signed the MOU, it has brought about a certain level of certainty among the Chinese exporters, who remain the prime beneficiary. On the other hand, it provides few more years of breathing period for the US based textile and clothing manufacturers. However, the most important advantage for other exporting nations like India, Bangladesh, Pakistan or Vietnam is that their struggle against Chinese goods in the US market is limited by the deal. Thus they have a fair chance to expand the textile and clothing exports. The growing Indian textile industry often complains of Chinese competition in the overseas market. However, now with the quota limitations, American buyers have to look at alternative textile manufacturing supplier countries more seriously.
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According to the memorandum of understanding on textile and clothing, it will impose quotas on Chinese textiles for three years on 21 categories of textiles and clothing. These categories include the largest and most sensitive categories, including trousers, shirts, knitwear, underwear, bras etc. According to the agreement, increase in imports of major textile and apparel products from China are limited to 10 to 15 percent in 2006, 12.5 to 16 percent in 2007, and 15 to 17 percent in 2008. Imports from the previous year would be used as the base to calculate the growth rate. Also, United States committed to allow customs clearance to all Chinese textile products currently blocked at the American ports. Further, US have also agreed to refrain from limiting other textile products not covered by the agreement.
According to sources, Chinese textile exports to the US increased by almost 50% in the first half of 2005 to US$ 17.7bn following the expiry of the Multi-Fibre Agreement. This has lead to complaints from the American textile manufacturers that resulted in several restrictive measures on Chinese textiles in the last one year. Also Sino-US trade relationship started deteriorating over several issues. However, the recent agreement would bring great relief to both the signatories as it would clear a major obstacle to future bilateral trade discussions. 
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