Textile Battles Continue In Beijing And Europe

by Mary Swire, for LawAndTax-News.com, Hong Kong

30 August 2005

As EU and Chinese negotiators continue to battle over textile quotas in Beijing, EU Trade Commissioner Peter Mandelson is urging EU member states to release blocked shipments of Chinese garments onto the market.

Imports of trousers, sweaters and bras which have been paid for by European clothing retailers are reportedly piling up in EU ports, as the quotas for those items have already been reached, whilst imports of t-shirts and certain types of yarn look set to reach their limits in the very near future.

The quotas, put in place until 2007 by Peter Mandelson - 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.

So what happened? Did negotiators forget to take into account orders already placed before June? Or did the manufacturers bring forward contracts to try to squeeze under the quota bar? It's interesting that Christmas goods have been arriving in Europe in August . . .

Three options are being considered in Beijing: to allow a once-off exception outside this year's quotas; to shift unfilled quotas around to cover over-subscribed categories; or to bring forward some of next year's quotas.

None of the options is very appealing, and they will all be opposed by European textile manufacturers.

Says Mandelson: “If the member states co-operate, I believe we will be able to unblock all the goods currently held at customs at the middle of next month.”

Meanwhile the US and China are due to resume 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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