Understanding helps free and fair trade
China Daily  Updated: 2005-06-13 05:53

To the relief of anxious Chinese textile exporters, a last-minute agreement has forestalled a looming trade war between China and the European Union (EU).

The China-EU deal reached late on Friday will allow the reasonable growth of Chinese textile exports while "giving respite and a much-needed breathing space" for European industries, as the EU trade chief Peter Mandelson said at Saturday's press conference in Beijing.

Undoubtedly, this is a hard-won win-win solution in the sense of avoiding a trade war. The sincerity and respect for mutual benefits both sides expressed in resolving the trade row were truly remarkable. They not only brought about a "mutually acceptable" result, as Mandelson said, but also showed a desirable approach for settling trade rows.

In an era of accelerated economic interdependence, it is consultation, not confrontation, that leads to solutions to trade standoffs which are in the interests of all sides.

A surge of Chinese textile exports following the removal of the global quota system at the start of this year is a surprise to nobody given China's comparative advantage in this and other labour-intensive sectors. A huge, cheap and relatively skilled labour force should have enabled the country to claim a much bigger share of the global textile market years ago, had developed countries not imposed quotas on its textiles.

As a trade-off for expanded future market access after its entry into the World Trade Organization (WTO), China accepted such a quota system, an odd by-product of the global trading body against its core principle of free trade, to give developed countries time to undertake necessary industrial restructuring.

Hence, it is up to those developed countries, which have benefited tremendously from increased access to developing countries' markets, to open their own markets in line with WTO rules.

Unfortunately, before the quota system expired on January 1, 2005, few developed countries worked seriously to prepare for the post-quota market.

Instead, some countries attempted to resort to the outdated quota system, risking a major setback in creating a free and fair global trade order.

However, as trade tensions have already significantly escalated, the urgent thing is not to trade criticism but instead try to understand each side's difficulties and fundamental interests.

The latest deal China and the European Union have sealed sets a good example for the international community which is increasingly threatened by some countries' unilateral protectionist acts.

By capping the growth of Chinese textile and clothes exports to the EU in the coming three years, the China-EU agreement provides a stable environment for Chinese exporters. It also gives European manufacturers a period to adapt to Chinese textile imports.

In the long run, the deal helps prevent protectionism from undermining European consumers' rights to enjoy the cheaper goods guaranteed by free trade.

The deal also helps strengthen rapidly growing economic ties between China and the European Union. With a bilateral trade volume of US$177.3 billion, the EU replaced the United States as China's largest trading partner last year.

Overall, the deal gives a shot in the arm to all those who are really committed to a global trade order which works for everyone.

(China Daily 06/13/2005 page4)

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