Commission Will Cave In Over Chinese Textiles

by Ulrika Lomas, for LawAndTax-News.com, Brussels

02 September 2005

EU Trade Commissioner Peter Mandelson has announced measures aimed at unblocking the Chinese textile products held up in European harbours because of problems with quotas agreed in July with China.

"The situation resulted from the fact that it took a month to enact the regulation enforcing the agreement," says the Commissioner. "During this period, member states were having to continue licensing imports in excess of the agreed quota. The Chinese authorities were also slow in putting their administrative machinery in place."

Following unsuccessful talks in Beijing with the Chinese, who are unsurprisingly playing hard-ball, it seems that the Commission is going to put its hands down and allow the blocked goods into the market outside the quota system.

"In these circumstances," says Mandelson, "I cannot accept that EU retail businesses should be penalised unfairly by the introduction of the agreement we made with China. I have therefore set in motion procedures to unblock the goods that have been caught in the ways I have described. Last week, member states called for this action urgently.

"There remain issues to be resolved about whether and how different segments of these unblocked goods should be counted in relation to the agreed quotas. The proposals I am making to my Commission colleagues and to member states address this question. It is also the subject of our continuing talks with China."

The quotas, put in place until 2007 following an agreement reached with the Chinese authorities in June after WTO membership for China led to floods of cheap imports, have come under heavy fire from retailers, with German fashion house Gelco announcing last week that it would launch legal action over the restrictions.

At crisis talks in June, Mr Mandelson and Chinese Commerce Minister Bo Xilai had agreed to limit the increase in Chinese textile exports by staggering their level in each of the next three years before the trade is fully liberalised in 2008. The agreement capped growth in EU imports of 10 categories of Chinese textiles from 8% to 12.5% a year.

"In certain goods." says Mandelson, "notably pullovers and trousers, the agreement came into force at the moment of maximum shipping of these seasonal goods. At the time, member states were not in the mood to delay the introduction of restrictions.

"In the event, the sheer volume of goods already in transit prior to the agreement, and the large amounts subsequently licensed immediately after the agreement, overwhelmed the arrangements made to implement the agreement. By definition these circumstances will not arise again."

Meanwhile the US and China are resumed interrupted talks on the same issue this week. When US limits were announced in May, US Commerce Secretary Carlos Gutierrez said there had been a surge in shipments from China since global quotas were lifted on Jan. 1. According to Commerce Department statistics, imports of Chinese textiles were up 54% in the first quarter on a year earlier. The US hopes to negotiate an agreement to restrain Chinese textiles and clothing exports until 2008. David Spooner, chief textiles negotiator for the US Trade Representative, said recently that the US and China had narrowed their differences.

Prior to the conclusion of the EU deal in June, a complaint had been lodged with the WTO, and the EU had been about to take action against China in the absence of voluntary measures to stem the flow of exports. The EU has suspended planned sanctions against two categories of exports, flax yarn and tee-shirts which had been due to come into force.

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