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WTO fearing escalation of textile trade row
Updated: 2005-04-29 08:41

The World Trade Organization is urging the European Union and China to talk through their dispute over booming Chinese textile exports amid fears that an outright clash would be a severe test for the global trade body.

"If there is a way of resolving this short of applying sanctions, it should be taken," WTO spokesman Keith Rockwell said. "Two months of data are not sufficient to make a true assessment," he added, referring to the need to quantify China's exports to the EU.

The European Commission confirmed it would implement a 60-day inquiry on Friday into a sharp increase in imports of Chinese textiles since a 31 year-old global quota system ended at the beginning of the year.

An EU spokesman in Geneva told AFP that Brussels also considered the probe as an opportunity to talk the issue over with Beijing. Any curbs on Chinese clothing imports would not kick in for another two months, if Brussels decided to take the issue further in a formal setting, he added.

"As soon as we ask for formal consultations, then the Chinese authorities have to limit their exports (growth) to 7.5 percent," said Fabian Delcros, a spokesman for the EU Commission.

Under the WTO's rule-book, the EU must first prove claims of "material injury" to its own producers and that it is caused by Chinese imports, before it can levy temporary trade barriers on imported products.

With the US also conducting a review of Chinese textile imports, the WTO is likely to end up arbitrating between trade titans if China formally objects to any safeguard measures, experts said.

"This is bigger than just textiles," said John Weekes, a trade consultant and former Canadian ambassador to the WTO.

"It does provide a test of the WTO. This is a challenge that can't be avoided but one that, if managed well, can show the importance of the organization (WTO)," he added.

China can challenge the EU in the WTO's disputes settlement body if it feels unfairly treated. That step may be necessary to clear up the rule-book, trade sources said.

EU Trade Commissioner Peter Mandelson earlier this week suggested that China could voluntarily curb textile exports to avert EU action.

But bilateral export restraints were prohibited when the multilateral trade system managed by the WTO was set up 10 years ago.

"Voluntary export restraints were one of the things that the new safeguards agreement emerging from the Uruguay Round was supposed to terminate," Weekes said.

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