China May Avoid Hitting Quota

September 7, 2007 - According to the Wool Record Weekly (Australia), analysts are saying that despite an increase in activity over recent weeks, it seems that China will continue to remain relatively quiet at Australian wool auctions due to it being keen to ensure that it does not reach the 287 million kilogram (kg) quota. Experts say that the wool trade in Australia is learning to live with the situation.

Australia, in an effort to continue exporting to China, recommended the raw wool quota be added to the tops quota allowing for a single quota number, thus increasing the raw wool quota for 2007. The Chinese government has indicated that this move is unlikely. China also stated that it is unlikely that the raw wool quota will be lifted for 2007.

Under its World Trade Organization obligations, China is required to recall any quotas that have been allocated but not yet filled on Sept. 15 and then reallocate it on a first come, first served basis. It is understood that unfilled quotas have not been recalled in the past, so with no precedence, it is questionable how this process might effect trade.

The Chinese government sets an annual quota of commodities that importers may bring into the country for domestic use. Its current global quota for wool is 287 million kg for greasy wool and 80 million kg for wool tops. As of July 17, the Chinese government suspended the processing of applications by Chinese importers stating that all quota had been issued.

The American Sheep Industry Association (ASI) is following this situation closely as there is concern that this event could still cause a drop in the wool market. Up to this time, ASI's Chinese wool consultant has been successful at facilitating markets for U.S. exporters and finding available quotas.
Staff contact: Rita Kourlis Samuelson, ext. 29

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