Textile Disputes and Two-Level

Games: The Case of China and

South Africa
_1241

115..130

Fanie Herman
National Chunghsin University
After the establishment of SinoSouth African trade relations in 1998, China gained access
to the South African clothing, footwear, and textile markets. By 2002, however, the
domestic constituency in South Africa had started to accuse China of ooding the markets
with inexpensive textile goods and engaging in unfair trade practices. As a result, a call
was made for the implementation of quotas on Chinese textile products. A two-level game
commenced, with the domestic constituencies on the one side and the governments of
both countries on the other side. The factors that contributed to double-edged diplomacy,
the process of both domestic and international negotiations, and the outcomes are discussed in this article. It is further important to comment on the strategic and policy
implications for both countries, as well as the inuence of the textile issue on the immediate region.
Key words: China, South Africa, textiles, trade negotiations, two-level game

China Enters the South African Textile Market

he article focuses on the entanglement of domestic and international factors

that led to a two-level game playing out between the South African and
Chinese governments in terms of the textile industry. The following research
questions are addressed in the article and compose the argument:
What motivated China to enter the South African textile market?
What factors led both sides to engage in a two-level game?
What were the role and inuence of the domestic constituencies (Level II) and
governments (Level I) in the negotiation process?
What was the outcome of the international negotiations?
What are the strategic and policy implications for China and South Africas
textile industries, in a bilateral and regional context?
Asian Politics & PolicyVolume 3, Number 1Pages 115130
2011 Policy Studies Organization. Published by Wiley Periodicals, Inc.

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South Africa established formal diplomatic relations with the Peoples Republic of China on January 1, 1998. The joint communiqu signed between Chinese
Vice Premier and Foreign Minister Qian Qichen and South African Minister of
Foreign Affairs Alfred Nzo on December 30, 1997, signaled the beginning of a
new era in the relations between the two countries (Song, 2007). Important
outcomes of the agreement were the strengthening and maintenance of economic
relations and the opening of two-way trade talks and investments. SinoSouth
African trade relations were quickly built on the foundations of opportunism and
in the spirit of free enterprise. Chinas admittance to the World Trade Organization (WTO) on December 11, 2001, allowed her to enter the African business
environment in a structured and regulated manner. The clothing, footwear, and
textile markets (hereafter referred to as the textile industry) were especially
promising business ventures, mainly due to their noncompetitive nature and
huge potential for capturing a market segment. China was aware that regulatory
mechanisms in the form of quotas were insufcient to control the inux of
textiles. Within a year or two, huge quantities of Chinese textiles had slowly
made their way to South African consumer markets. This, in turn, led the textile
industry and labor unions in South Africa to accuse China of dumping, causing
unemployment and the closure of factories. According to the statistics from the
General Administration of Customs of China, its trade surplus against South
Africa mounted to US$1.68 billion from 2001 to 2006. But South African statistics
showed its trade decit with China to be US$4.78 billion, making China South
Africas largest source of decit (Song, 2007). The textile industryas both a
major provider of jobs in the manufacturing sector and a signicant export
contributorwas hit hard by the unfair trade balance. Thus, the two issues of the
textile dispute and unfair trade balance were clearly linked.
In the beginning, the South African government was unwilling to get involved
in the dispute because it did not want to jeopardize its trade relationship with
China. However, under immense pressure from the domestic constituency, the
government nally agreed to negotiate a textile deal.
It is important to understand what motivated China to ood the South
African market with textile products. The most plausible reason is that the
Chinese traders did not feel threatened by a reaction from the domestic constituency. The South African government assigned the most-favored nation
status to China, for which reason the trade issues were placed above the
national security issues. The South African government also presented freemarket status to China, whereby the prices of goods and services are determined in a free-price system set by supply and demand (Fabricius, 2004).
Another reason for Chinas action was the fact that due to low-production
output of the local market as well as its noncompliance with market trends,
South Africa needed to import more textiles. China could also set up textile
factories at a 66% minimal cost and employ hundreds of workers to curb the
growing unemployment rate (Fabricius, 2004).
Advocates for the textile industry stated that dumping increased after President Thabo Mbeki was elected for his second term in 2004. Mbekis liberal
economic policy presented the Chinese traders with the opportunity to ood the
market without any real fear of reprisal by the South African textile industry. This
quickly culminated into a tricky matter for the local textile industry. One factor

Textile Disputes and Two-Level Games: The Case of China and South Africa

117

that weighed heavily against them was the job losses caused by unregulated
dumping. The failure of the South African government to protect the local industry through quotas and tariff control further contributed to growing dissent
among the domestic constituency.
The two-level game was particularly strong between the trade unions representing the South African textile industries and the Department of Trade and
Industry (DTI) representing the government. The trade unions, in reality, were
labor groups that constituted one part of the broader domestic constituency. The
Democratic Party (DA)the ofcial opposition party in the parliamentthe
media, industrial lobbyists, and individual traders constituted its other part.
While it is true that in the theoretical application of two-level games, the chief of
government (COG) acts as the main negotiator, the COG in his or her leadership
capacity, however, has the ability to appoint a subordinate to act as chief negotiator. This was seen in President Hu Jintaos decision to transfer the negotiation
role to Premier Wen Jiabao. For practical purposes, ofcials from the DTI acted as
the main negotiators with the opposing Chinese side during the negotiation
process, but President Thabo Mbeki as COG signed the agreement with premier
Wen Jiabao on June 22, 2006.
This research is divided into ve sections. The rst section explains the methodology of the research and the core concepts of two-level games. The second
section constitutes an overview of the textile industry and highlights the inuence of domestic variables. The roles actors played and their win-sets are
described here. The third section reviews the international negotiation process.
Here the focus is on ofcial government interaction, which paved the way for the
signing of an agreement. The strategic outcomes of the negotiations, the policy
implications for the textile industries of both countries, and the inuence on the
region are discussed in the fourth section. Finally, although the policy implications per se do not reect on the two-level game analysis, it shows Chinas
involvement in the African textile sector, government management of textilerelated issues, and responses from the industry.

The Logic of Two-Level Games

In his classic work on the logic of two-level games in diplomacy and domestic
politics, Robert Putnam (1988) made the case that diplomatic interactions should
be modeled as negotiations interlinked with domestic politics. In abstract form,
the metaphor of the two-level game was intended to represent a broad array of
situations in which negotiators representing two organizations meet to reach an
agreement between them (at Level I), subject to the constraint that any tentative
agreement must be ratied by their respective organizations (at Level II; Evans,
Jacobson, & Putnam, 1993, p. 435). At the national level, domestic groups pursue
their interests by pressuring the government to adopt favorable policies, and
politicians seek power by constructing coalitions among those groups. At the
international level, national governments seek to maximize their own ability to
satisfy domestic pressures while minimizing the adverse consequences of foreign
developments. Neither of the two games can be ignored by central decision
makers, so long as their countries remain interdependent, yet sovereign (Evans
et al., 1993, p. 436).

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The basic assumptions of the two-level game analysis are outlined below.
Level I: Internationalbargaining between negotiators leading to a tentative
agreement.
Level II: Domesticseparate discussions within each group of constituents about
whether to ratify the agreement.
Putnams main objective is to show that there can be a sequence to negotiations, with international negotiations being followed by related domestic negotiations on such matters as ratication. Within the two-level game framework,
Putnam explains that the success or failure of negotiations depends upon the
existence of overlap between perceptions of acceptable outcomes at both levels of
negotiations. He calls this overlap a win-set. The boundaries of a win-set are
conditioned by the distribution of power, the preferences, and the possible
coalitions among Level II constituents. It is also possible that the negotiators at
Level I may manipulate the outcome to try to appease their international negotiation partners, as well as domestic pressure subgroups, even when the interests
of each seem diametrically opposed. Put simply, for international agreements to
be achieved, there must exist some overlap between the set of outcomes acceptable to the international negotiators at Level I and those preferred by the groups
involved at Level II. Without such overlap, no nal international agreement is
possible, either because the domestic constituency will not approve the agreement made at the international level or because what is acceptable as dened by
the involved domestic actors proves unacceptable to the other involved country
or countries (Starkey, Boyer, & Wilkeneld, 1999, p. 88).
One of the tasks of this article is to identify whether the relative balance of
inuence is derived from domestic or international sources. Are the interactions
between Level I and Level II an exact copy of Putnams classical work, or are they
built on specic characteristics of the dispute? The nding of this case study is
that the two-level application deviates from the original work of Putnam because
of three distinctive features. In the rst place, the emphasis is on the demands
of the South African domestic constituency and the manner in which it shaped
the negotiation process. This means that the distribution of negotiating power
between the Chinese and South African domestic constituencies is uneven.
Second, China is regarded as the main international negotiator due to the salience
of the issue; this reects on the prominent and comparative bargaining advantage
of China in international trade negotiations. The nonpoliticization of the ratication process stands out as the third feature. As Evans et al. (1993, p. 438) point out,
it is not a prerequisite for the ratication process to be endorsed by the supreme
authority. Ratication can also be a function of public opinion and domestic
consent to the issue, as this study illustrates.

The Textile Industry: Domestic Variables

The Issue
The textile industry in South Africa is the countrys 6th largest manufacturing
sector employer and 11th largest exporter of manufactured goods (Lame DTI,
2009). It directly employs an estimated 230,000 workers and another 200,000 in

Textile Disputes and Two-Level Games: The Case of China and South Africa

119

Table 1. Total Import Values

Imports (US$ million)
Clothing: Total
Clothing: China
Clothing: Other
China % of total
Textiles: Total
Textiles: China
Textiles: Other
China % of total
Footwear: Total
Footwear: China
Footwear: Other
China % of total

2002

2003

2004

2004/2002

176
96
80
54.5%
659
78
581
11.8%
190
120
70
63.2%

305
202
103
66.2%
777
121
656
15.6%
270
188
82
69.6%

561
417
144
74.3%
1,003
190
813
18.9%
403
292
111
72.5%

218.8%
334.4%
80.0%
36.3%
52.2%
143.6%
39.9%
60.0%
112.1%
143.3%
58.6%
14.7%

Source: Brink (2006, p. 3).

Notes: The information in the table shows that Chinese imports have grown as a percentage of total
imports. Clothing and footwear imports represented more than 70% of total imports, but textile
imports from China represented less than 20% of total imports.

dependent industries, such as transport and packaging. This labor-intensive

industry was identied by the government as a priority for job creation and
economic growth, and since 1994, over US$1 billion has been spent on upgrading
and modernizing South Africas textile, clothing, and footwear industries to
world standards. A report by the South African Textile Industry (2007) stated that
employment in the industry has declined from 70,500 in 2003 to just below 50,500
in 2006. The Industrial Development Corporation of South Africa (IDC; 2007) has
calculated that for every worker in the textile industry, 2.5 jobs are generated in
related industries. Historically, textile and clothing imports into South Africa
originated from a wide range of countries, chief among them Taiwan, South
Korea, and Europe. Since 2001, imports have increasingly been sourced mainly
from China. In the case of clothing imports, 89% currently originates from China,
3% from India, and the remaining 8% from the rest of the world; 60% of all
nished textiles (blankets, bedsheets, towels, and curtains) originate from China
(IDC, 2007).
The impact of China on the South African textile industry, however, is not the
only reason for the job losses and closure of factories. South Africas clothing,
footwear, and textile industries have been in decline for over 15 years. In South
Africa, trade liberalization of any signicance began only in the mid-1990s, and
imports from China surged from 2002 (see Table 1). A more balanced view,
therefore, would be as follows. First, investment in capacity, technology, and
management has been insufcient to ensure that South African producers are
able to cope with the increased competition in world markets. Low investment
levels reect low expected returns. Second, value of the Rand in recent years has
proven to be a challenge to all price-sensitive exporters, clothing and textile
manufacturers included. Third, South Africa is less productive, and always has
been, than many Asian nations in most labor-intensive manufacturing areas. This

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means higher unit labor costs, which is a bad thing for any labor-intensive
industry. Fourth, there are other contributors to South Africas relatively high
cost base, such as the relative isolation of the country from major markets, which
raises freight costs; its small internal and regional market, which limits the
exploitation of scale economies; and relatively high internal transport and communication costs. All of these affect the clothing and textile industries. Fifth, there
is considerable evidence to suggest that the South African clothing and textile
industries would never have grown so large if (a) domestic protection had not
been so high in the rst place and (b) if global activity had not been so distorted
through the multilateral quota systems of the multiber arrangement and then
the agreement on textiles and clothing. Some argue that these arrangements are
responsible for Chinas more-rapid-than-expected ascent of the value chain.
Arguing in favor of less protection, the president of the American Apparel and
Footwear Association was quoted as saying, Instead of producing millions of
low-value T-shirts, China produced thousands of much-higher quality and
higher value sweaters, polo shirts and dress shirts (Alves, 2006, p. 6).

South Africa
The domestic role-players. Clotrade, a body representing both domestic
clothing manufacturers and importers, lodged a request for safeguards to be
imposed against clothing imported from China with the International Trade and
Economic Development Division (ITEDD), a division of DTI, in 2004. After a year
of no response from the ITEDD, Clotrade consequently lodged a safeguard
application with the International Trade Administration Commission (ITAC) in
June 2005. The application was based on the allegations that imports from
China had increased signicantly, that prices of these imports were exceptionally
low, and that more than 76,000 jobs had been lost in the industry, mainly as a
result of cheap imports from China (Brink, 2006, p. 3). Clotrade requested ITAC
to take action in line with the action taken by the European Union (EU) and the
United States, i.e., outside the parameters of the WTO, rather than a normal
or protocol safeguard. Clotrade requested that quotas should be imposed,
that a signicant additional ad valorem duty be imposed on any imports
outside the quotas, and that certain minimum values be adopted for customs
valuation purposes on the basis of Chinese exports process to the EU and the
United States. Clotrade requested protection against all imports under
Chapters 61 (Articles . . . Knitted, n.d.) and 62 (Articles . . . Not Knitted, n.d.)
of the Harmonized Tariff system, covering some 263 tariff lines. Clotrade also
requested that imports from Hong Kong in reality originate in China, as very
little apparel is manufactured in Hong Kong (Brink, 2006, p. 3). ITAC rejected the
application, inter alia, on the basis that it was not prepared to act outside the
parameters of the WTO. The Southern African Clothing and Textile Workers
Union (SACTWU) application had a signicantly wider general ambit than the
Clotrade application in that it also included a number of textile and footwear
products, as well as certain products imported under Chapter 63. Other than in
the Clotrade application, not all tariff lines under Chapters 61 and 62 were
included in its application.

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121

The South African government was represented by the DTI through two of its
subdivisions, namely ITEDD and ITAC of South Africa (South African Department of Trade and Industry, 2006). The unions and manufacturers urged the
DTI to invoke safeguard measures, but a standard reply was that the local
industry should instead become more dynamic and implement structural and
operational reforms. According to Harrison (2006), the DTI also stated that the
dispute should be blamed on the strong Rand (ZAR) and that the South African
government would not pursue safeguard measures to limit the surging
cheap Chinese apparel imports. Mr. Mandisi Mpahlwa, the minister of trade
and industry, assured stakeholders that negotiations with China have taken
place and a high level of progress has been achieved (Harrison, 2006). Zwelinizima Vavi, head of the Congress of South African Trade Unions (COSATU),
in a strongly worded statement said, While we appreciate the DTIs desire to
negotiate a mutually acceptable agreement with China, it seems the Chinese side
is simply dragging out the talks to avoid stronger measures. The government
is too soft on China and doing little to protect jobs and factories (Harrison, 2006,
p. 2).

The South African win-set. Thanks to the internal and external consensus
building by the trade and textile unions, as well as critique by the DA, the
acceptability sets of the major actors proved to be very similar. This consensus,
especially its inextricable linking of imposing quotas on textile imports with the
unfair trade balance, and the broad coalition of interests it represented, was to
fundamentally shape the win-set of the South African actors. This win-set was
based on a number of proposals: some directly applicable to the two-level talks
and others serving as a legal basis for implementing quotas, according to Brink
(2006, p. 9).
1.

An agreement should be reached between both countries on quantitative

targets for imports. As far as textiles are concerned, the agreement should
provide quotas on 31 products for a xed period and, for clothing, 24 of 73
products as covered in the South African tariff book.

2.

The High Court ruled that the WTO antidumping agreement nds application in South Africa, insofar as it is not inconsistent with South African
legislation and the same would, therefore, apply to trade deals with China.

3.

Antidumping should be an objective for both countries to determine whether

unfair trade is taking place (i.e., whether there is price discrimination
between Chinas domestic and export markets; Brink, 2006, p. 10).

China
Domestic role-players. The All-China Federation of Trade Unions
(ACFTU)with its national industrial union, the National Committee of the
Chinese Financial, Commercial, Light Industry, Textile and Tobacco Workers
Unionwas concerned about the employment benets of individual workers
and stabilizing export gures. Like COSATU of South Africa, ACFTU provided

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moral and labor-related support. The China National Textile and Apparel Council
(CNTAC), which represented hundreds of local manufacturers, had an economic
interest with South African companies. According to Vice Minister of Commerce
Wei Jianguo, the Chinese government and CNTAC were willing to exchange
technology and invest in the South African textile sector, thus stopping negative
publicity and building a trustworthy relationship (Sub-Council of Textile Industry, 2006a). The CNTAC and Seardell Investment Holdings (the biggest clothing
and textile manufacturer in South Africa) voluntarily agreed to reduce Chinas
clothing and textile exports to South Africa. The two organizations had expressed
mutual concern that clothing imports from China had risen 40% since 2002, and
the ows had to be controlled (Sub-Council of Textile Industry, 2006b). The
Chinese Ministry of Commerce (MOFCOM) represented the government at
Level I. Its mission with regard to international cooperation can shortly be
described as follows:
1.

To formulate development strategies, guidelines, and policies for domestic

and foreign trade and international economic cooperation

2.

To study and work out measures for the regulation of import and export of
commodities and compile a catalog thereof, organize the implementation of
import and export quota plans, decide on quota quantity and issue license and
draft, and implement import and export commodity quota tendering policies

3.

To study, make, and implement multilateral and bilateral trade and economic
cooperation policies, be responsible for multilateral and bilateral negotiations
on trade and economic issues, coordinate domestic positions in negotiating
with foreign parties, and sign the relevant documents and monitor their
implementation; to establish multilateral and bilateral intergovernmental
liaison mechanisms for economic and trade affairs and organize the related
work (MOFCOM, 2009); to handle major issues in country-specic economic
and trade relationships, and regulate trade and economic activities with
countries without a diplomatic relationship with China.

Chinese win-set. The Chinese governments acceptability set was based

on the framework of the Bi-National Commission (BNC), formalized in December 2001, when President Thabo Mbeki, accompanied by eight Cabinet Ministers,
paid a very successful state visit to China. During the meeting, both countries
agreed upon certain economic and trade principles (South African Department of
Foreign Affairs, 2004). The second South AfricaChina BNC that took place in
Pretoria on June 29, 2004, further emphasized the conditions of trade and gave
rise to the following objectives or priorities (South African Department of
Foreign Affairs, 2004):
1.

The rst priority was to strengthen trade relations without jeopardizing

treaties signed on trade and economic cooperation. In the initial stages of the
dispute, the government was more concerned about keeping bilateral relations intact. Finding a solution to the crisis became a concern only after
antidumping cases were lodged by Texfed. The crisis worsened when Clotrade and SACTWU applied for the imposition of quotas on certain clothing,
footwear, and textile categories.

Textile Disputes and Two-Level Games: The Case of China and South Africa

123

2.

During the second stage of the dispute (antidumping measures and quotas),
the Chinese government undertook to exchange technology with the South
African textile market. The idea was to modernize the industry and halt the
continuous job losses. China would also help to increase the competitiveness
of the South African textile market. Compliance with regulations of the WTO
would further ensure smooth cooperation.

3.

The Chinese leadership was committed to improving its image as a responsible stakeholder and avoiding negative publicity around textile issues. This
is evident by the statements of government ofcials. For example, Ruan
Zongze, vice president of the China Institute of International Studies said,
We will take further economic measures to prevent an over-rapid growth of
Chinas textile and garment exports and will strengthen macro control over
rapid increases in exports of textiles and clothing (Qihua & Qin, 2005, p. 4).
The government and the textile industry are both working to ease the concerns of foreign counterparts who fear Chinese textiles will swamp the world
market in the quota-free era (Textile Industry Moves, 2005). A report by
Chinas National Development and Reform Commission concludes: The
textile industry must adapt to a more exible Yuan regime as soon as possible, integrate international management practices and develop ways to
guard against currency risk (Will China Deal, 2006, p. 3).

Process of International Negotiations

The DTI arranged meetings with the government of China after reviewing the
applications made by the trade unions. On February 28, 2005, Gao Hucheng,
Chinese Vice Minister of Commerce, met with Ms. Nomonde Maimela, Chief
Commissioner of the ITAC of South Africa, and discussed the win-sets of both
countries. The two parties agreed upon the general conditions (MOFCOM, 2005).
The Chinese Ambassador to South Africa, Mr. Liu Guijin, promised in 2006 that
his country would limit exports of garments and some textile items to South
Africa. He warned, however, that if his country restricted its exports to South
Africa, other developing nations would simply step in and ll the gap (Fabricius,
2004).
As a result of the international negotiations, and with the desire to nd a
solution to the dispute, President Thabo Mbeki of South Africa and Premier Wen
Jiabao of China signed an agreement on June 22, 2006. What was the signicance
of the agreement? First, both COGs reached full understanding and accommodation on the issue and concluded that issues in the textile trade will in no way
compromise economic relations and trade between the two countries (South
Africa, China Sign, 2006). Second, China agreed to cut textile imports to South
Africa by a third and accepted that quotas on Chinese textiles and clothing
imports would be imposed for three years. Third, China would not seek to take
over the market share of other countries by simply enlarging the scale of its
textile production, and Chinese Premier Wen Jiabao expressed the willingness
to take self-restrictive measures to ensure stability of textile markets in this
country and will continue to honor the WTO rules and regulations in the textile
industry (Will China Deal, 2006, p. 3). The deputy president of South Africa,

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Phumzile Mlambo-Ngcuka, welcomed the understanding reached on textile

trade, describing it as a unique deal proving that China was willing to walk
the extra mile. Trade and Industry Minister Mandisi Mpahlwa hailed Chinas
willingness to forge an agreement with South Africa to assist in rescuing the
struggling clothing and textiles sector (South Africa, China, Sign, 2006).

Domestic and International Constraints: Strategic Outcomes

It is important to evaluate the win-sets of both parties and see in what way they
affected the outcomes of the negotiations. According to Evans et al. (1993, p. 436),
the decomposition into a negotiation phase and a ratication phase is useful for
the purpose of exposition, although it is not descriptively accurate. There are
likely to be prior consultations and bargaining at Level II to hammer out an initial
position for Level I negotiations, as SACTWU and COSATU have illustrated in
their preliminary attempts to nd an organizational solution to the issue and then
present their ndings to higher authorities. The role of work study groups to
assess the impact of textile imports from China was especially signicant, since it
identied the strengths and weaknesses of the situation at the time. The domestic
constituency in South Africa feared that the cost of disagreement would represent the status quo and called for continuous negotiations with the government
to legitimize their win-set: in other words, to strike a deal at Level I. An
advantage for the domestic constituency was its homogenous character with
textile groups across the region. Countries in the region were unsatised with
dumping and appealed to higher bodies, such as the WTO, for relief measures.
This politicized the issue across borders and placed China in an irreversible
negotiating position. The South African COG now had bargaining advantage
over his Chinese counterpart. The unfair trade balance presented an issue linkage
because Chinas exports to South Africa, pro rata, were about 70% more than
South Africas exports to China. The domestic constituency used this linkage to
further strengthen its case by calling on China to open its markets for the exports
of South African goods. The Chinese COG in reply stated that the unfair trade
balance is unprecedented and needs to be rectied. Another point is the strength
and autonomy of both states. The South African central decision makers possessed great autonomy from Level II constituents and could thus present a large
win-set to China. It also increased their chances of achieving an agreement. But
looking at the interplay of COSATU and SACTWU with ofcials of the DTI, it
seemed that South Africa had a weak bargaining position internationally. On the
other hand, the strength of Chinas economy after joining the WTO gave it a
stronger negotiation position. When the agreement was signed on June 22, 2006,
SinoSouth African trade relations had already shown the signals of becoming
the strongest relationship in Africa. Entry to the WTO only legitimized the
Chinese desire to build a solid trading partnership with South Africa.
The attempt at Level I to restructure and expand the win-set of China was
highlighted with the visit of the South African labor minister, Membathisi
Mdladlana, to China. He said, South Africas trade unionists should go to China
and see for themselves the brilliant experience that country has had in achieving
its integrationon its own termsinto the global economy. Acknowledging
that South Africas textile industry had been bleeding, he said it was critical

Textile Disputes and Two-Level Games: The Case of China and South Africa

125

to learn from China the skills that were conducive to employment creation
(Unions Urged, 2006, p. 5). This was a clear indication that the South African
COG sought to bounce the ball back into the Chinese courtyard, winning domestic support and thus inuencing the international negotiations. The reverberation
effect also had a positive spin-off in the overall trade relations between both
countries. After an agreement was signed in 2006, both countries vowed to
identify areas where economic relations could be strengthened.
How did the preferences of the statesmen inuence the choice of strategies and
the outcome of the negotiations? Since the two-level games approach posits
partial autonomy of the statesmen, two-level analysis requires a specication of
the statesmens preferences. A rational statesman will employ available doubleedged strategies only if they further his or her aims. The set of agreements
preferred by the statesman to the status quo may be termed the statesmans
acceptability set. These preferences may reect (1) the statesmans interest in
enhancing his domestic position, perhaps by pursuing the median domestic
interest; (2) an effort to mobilize an optimal response to international imperatives, regardless of domestic factors (much as the Classical Realists portray it); or
(3) individual policy preferences about the issues in question, perhaps stemming
from idiosyncratic rst-image factors like past political history or personal
idealism (Moravcsik, in Evans et al., 1993, p. 30). The focus of the analysis is on the
strategic incentives created by certain congurations of the acceptability-set relative to the domestic win-set. The possible congurations can be divided into three
categories: the statesman-as-agent, the statesman-as-dove, and the statesmanas-hawk. In the case of the statesman-as-agent, the statesmans acceptability set
reects the interests of the median domestic group and is encompassed by the
domestic win-set. In the case of the statesman-as-dove, the acceptability set lies at
least partially outside the domestic win-set and closer to the opposing win-set. In
the case of the statesman-as-hawk, the acceptability set lies at least partially
outside the domestic win-set but further from the opposing win-set than the set
of agreements ratiable domestically (Moravcsik, in Evans et al., 1993, p. 31).
Which one of the congurations explains the preferences of the statesmen in this
case study? Looking at the Chinese side, Hu Jintao had little incentive to expand
the win-set because of an absence of conict between the statesman and the
domestic constituency. However, Hu Jintao did contract the win-set to gain an
edge in the negotiations. Thus, his role was one of the statesman-as-agent. Thabo
Mbeki portrayed a hawkish attitude during the rst stages of the negotiations
because of his attempt to expand the win-set (cut slack), for the sake of favoring
an agreement with China, independent of its content. This brought the Chinese
COG closer to a point of compromisea practice that runs counter to the normal
expectation that the statesmen will preserve the maximum possible level of
executive autonomy. In simple terms, the South African COG was afraid that the
domestic constituencys win-set would be unacceptable to the opposing party
and therefore reduced their level of autonomy. Chinas promise of side payments
in the form of direct investments and modernization of the industry was seen as
a positive gesture by COSATU and SACTWU. An agreement with China could
help create more than 60,000 new jobs in the industry, a spokesperson for
COSATU said before a nal agreement with China was signed (Le Roux, 2006,
p. 6). Premier Wen Jiabao said, China promises not to destroy South Africas

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textile industry, but will help develop the ailing sector that has lost an estimated
25,000 jobs in the past two years (China Pledges, 2006, p. 5). Only when the
governments acceptability set and the domestic constituencys win-set coincided
did Mbekis attitude change to a statesman-as-dove. The governments negotiating terms were now closer to the opposing win-set.
Domestic groups also have opportunities to develop similar strategies and
counterstrategies as statesmen (Moravcsik, in Evans et al., 1993, p. 32). Was there
a business link between the textile industry of South Africa and China? Did the
domestic constituencies reach consensus on the terms of the negotiations? Business partnerships increased between both countries after 2001, and the textile
sector was no exception, but a formal code of conduct laying down the rules of
the game, was absent. For this reason, individual manufacturers had no platform to express mutual concerns and could not reach consensus on the issue.
On the other hand, textile manufacturers in China are subjected to strict government rules and regulations, which restrict the normal ow of business
exchanges across borders. This inuenced the Chinese governments behavior.
First, the government was afraid that intercompany talks would jeopardize its
negotiations with South Africa and impair the drafting of an acceptability set.
Second, free business contacts would undermine the autonomy of the government to control the current textile dispute and future trade talks. Third, the
government wanted a complete handle on all stages of the negotiations and
could not allow the domestic constituency to derail the negotiations. What were
the effects of the negotiation process on Chinese policy recommendations? The
nding is that the pressure of the international negotiators on the domestic
groupings had only a minor inuence in the negotiation process. It is actually a
dispute that arose out of the socioeconomic injustices the manufacturers and
workers faced in their respective textile industries and not as a result of disagreement on state-to-state trade relations. The pressure from the Chinese
domestic constituency had an effect on the Chinese governments decision to
enter into talks with its South African counterpart. China aspired to nd a
peaceful settlement of the issue and strengthen its trade relations with the economic powerhouse of Africa. If it could achieve this objective, the door would
be opened for role-players in the local textile industry to establish transnational
trading partnerships without strong government intervention. In other words,
private entrepreneurship was encouraged. In actual fact, the manufacturing
industry in China, and this includes textiles, started opening up its markets
with economic reforms launched by Deng Xiaoping in 1978. It has been an
ongoing process where national economic reform relies on the inputs of the
domestic role-players for the drafting of foreign economic policy. The domestic
constituency in China also raised awareness among the Chinese negotiators that
the bargaining power of domestic groups is an important factor in shaping the
course of international negotiation. Although the Chinese domestic groups did
not put pressure on the government to enter into negotiations, the stakes were
also high on their part. They relied on the South African market for the ofoading of textile products, and the agreement softened accusations by the South
African textile industry that China is dumping and engaging in unfair business
practices. The signing of the agreement was important to show that both countries can cooperate on trade disputes.

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127

China and Africa: Strategic and Policy Implications

for the Textile Industry
The technology gap between China and the developed world, of which South
Africa is a part, presents a unique pattern in analyzing Chinas economic interests
in Africa. Chinas industry is now in transition from labor intensive to capital
intensive and technology intensive. But it is not yet equipped with the conditions
for a complete transition to knowledge or information-based industries. Currently
Chinas major export products are textiles (China Foreign Economic Trade Yearbook, 1993, p. 454). Developing economies, such as South Africa, India, Kazakhstan, and Romania, became new engines for Chinas export of textiles and apparel,
with growth margins of over 50% (China Chamber of Commerce for Import &
Export of Textiles, 2004). Deepening of South Africas economic ties with China
has raised important questions as to the uneven impact of trade in certain sectors
of the economywith locally produced textiles experiencing sharp reductions,
whereas exports of South African agricultural products are soaringand has
created challenges for China and South Africa alike. The emphasis of South
AfricaChina trade has been on the Chinese acquisition of minerals, agricultural
goods, and related commodities, whereas South Africa absorbs imports of lowend consumer goods. This is, however, changing, and we are beginning to see
higher-value-added products from China, such as automobiles and white
goods, entering the local market, according to Alden (2008, p. 5). Some experts
also point out that whilst China has offered low-interest loans to many African
countries, South Africa is not among them. Pretoria for its part is unwilling to serve
its natural resources on a silver platter and is more interested in encouraging
capital investment and ensuring that its own industrial base is not weakened by
cheap Chinese imports (South Africa Seeking, 2007). David Monyae, a lecturer in
international relations at the University of the Witwatersrand in Johannesburg,
said that China was a potential source of growth for several of South Africas highly
industrialized sectors but warned that most African countries are negotiating
with China from a position of weakness in all respects (South Africa Seeking,
2007). If China has been forthcoming in aiding and investing in Africa with few
strings and considerable cash, it has been equally rm in defending its export
policies. Chinas Economic and Commercial Counselor in South Africa warned
South Africans that unfair and discriminative restrictions will never be accepted
by China. He pointed out that China was within its rights under the WTO and had
invested carefully during the 10 years of the multiber arrangement to become
efcient and competitive. Thanks to the arduous efforts over the years, the
Chinese textiles and clothing industry managed to sharpen its international competitive edge and gained the comparative advantages its now enjoys (Smith,
2006).
Even if African countries placed restrictions on Chinese goods, they would not
be able to control the substitute ow of goods from India and Pakistan. The
solution, he said, was for South Africa to adopt a positive attitude (Safo, 2005).
According to Renato Palmi from Redress Consultancy, the China syndrome that
has dominated the discourse of South Africas apparel sector from 2002 to 2006
is no longer as relevant as it was in the past. The bigger threat to South Africas
textile and apparel sector is the industry itself and the South African government.
China itself is facing major competition from its Asian neighbors, such as

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Vietnam, Bangladesh, Cambodia, and Indonesia. Whether South African retailers

will hurriedly relocate their procurement of apparel from China should the
quotas be lifted is doubtful. The cost of doing business in China has risen; there
are stricter labor regulations as China continues to change its global image
(Palmi, 2008). The concern is the lack of a coordinated strategy by the DTI for the
South African clothing and textile sector. Returning to the Chinese quotas, the
DTI has hinted that there may be an extension due to the massive and systematic fraud involving Chinese imports. The DTI and South African Revenue
Service have been informed of these illegal imports before. In 2008, Palmi wrote,
Rumours are rife in the clothing and textile industry that retailers, buyers and
importers are breaking the law by continuing to import goods from China (p. 1).
For the DTI to have raised the alarm now is of concern. But it also indicates a
deafness and blindness when such information is reported to them from industry
analysts (China Import Scam, 2008).

Conclusion
The two-level game analysis of Putnam provides an important insight on how
to evaluate the process of interaction between the domestic constituency and the
team of international negotiators. Of particular importance for this study was the
way in which the issue developed from a domestic to an international dispute
and the signicance of the two-level analysis to explain the negotiation process.
Negotiations between Level II and Level I were a timely matter and never an easy
task. Another nding is that the win-sets of both parties differed in opinion but
not strategically. The domestic constituencies were concerned about rising unemployment and protecting the textile industries from collapse, therefore calling for
quotas and import regulations. They attempted to achieve these goals with strong
union backing and by getting public support behind them. The governments
wanted to build on the new economic relationship through the use of diplomacy,
not always paying attention to the needs of the domestic constituencies. This lack
of communication was a costly affair at the initial stages because it allowed the
issue to evolve into an international dispute, not only involving China and South
Africa, but also affecting the region. The South African government only realized
the importance of building a relationship with the unions and local industries
during the second stage of the negotiations. This delaying tactic presented China
with bargaining chips at the expense of the South African domestic constituency.
Even though South Africa and China ceteris paribus agreed on the nal win-sets,
the results could have been different if Level I and II negotiations were more
transparent. What can nally be said? Narrow rm interests and sector interests
must be weighed with wider interests that are usually not expressed as vocally
as they are with the textile quotas. Long-term careful and innovative strategic
planning with clear objectives is therefore required to succeed in a competitive
trade relationship. This is also important for South African rms competing
with imports from China, as well as for those in the rest of the world who are
competing against China. Although the South African textile industry is under
threat of collapse, China has indicated its willingness to enhance technology
transfer and investment cooperation with South Africa. If this industry is to
survive through reform, collaboration with China is imperative.

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129

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