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EU, China clinch deal to avert showdown
Updated: 2005-06-11 11:34

The European Union and China clinched a deal on Friday limiting the rise in Chinese exports of textiles and clothing to the EU until the end of 2008, averting the imposition of quotas that could have soured ties.

Chinese Commerce Minister Bo Xilai (right) presents a T-shirt to EU trade chief Peter Mandelson as a gift after their meeting in Shanghai on Friday. [China Daily]

"The overall settlement offers a fair deal for China while giving respite and much-needed breathing space to textiles industries in Europe and developing countries," EU Trade Commissioner Peter Mandelson said in a statement.

The agreement, thrashed out in Shanghai by Mandelson and Chinese Commerce Minister Bo Xilai, came after months of tension over an explosive rise in shipments of cheap exports from China.

The rise, which has generated fears for the future of the garment industry and millions of jobs in Europe and the United States, was unleashed by the Jan. 1 abolition of a decades-old global system of quotas.

Resorting to terms agreed when China joined the World Trade Organization (WTO) in 2001, the United States has already slapped temporary restrictions on seven garment and textile products, provoking an angry reaction from Beijing.

The 25-nation EU had been due to follow suit by early next week, limiting shipments of T-shirts and flax yarn to 7.5 percent over the previous year had China not taken voluntary steps to curb exports of these products to this level. These so-called "safeguards" would have been effective only until the end of this year, making it likely that the EU would have had to seek their re-application in six months' time.

The pact agreed by Mandelson and Bo caps exports on a wider range of products and will remain in effect for a longer period.

"The agreement provides for agreed transitional growth rates between now and 2007, followed by a further year during which both sides will work together closely in the hope that trade is conducted without further interference in this sector," Mandelson told a news conference with Bo in Shanghai.


Details of the cap on China's exports and the number of textile and clothing products covered by the accord were not announced immediately. Officials said the growth allowed in China's exports to the EU would be higher than 7.5 percent.

The agreement will still need the approval of all members of the 25-nation EU, though diplomats said that even France and Italy -- which have taken the toughest line on Chinese imports -- were likely to back it.

"The alternatives are that Chinese imports keep coming in and disrupting the market, or that we take unilateral action which would give us narrower coverage for a shorter time and a nasty row with the Chinese," an EU official said in Brussels.

Both Bo and Mandelson had talked tough in public before their talks, with the Chinese minister vowing to protect the rights of an industry that employs 19 million people and is a vital cog in China's export-driven economy.

But at the news conference Bo praised the British EU commissioner's "profound understanding" of Oriental culture and presented him symbolically with a gift of a blue-gray Chinese polo shirt.

Bo said the agreement would provide a long-term and stable environment for Chinese textiles.

"At the same time it also provides a stable import environment for the EU countries," he added.

EU imports of T-shirts rose by 157 percent to more than 150 million in the first quarter of this year, but pullovers and men's trousers leapt even more, by over 400 percent.

Economists fear the tussle over textiles will be the first of many trade rows if China's exports continue to boom.

China on Friday reported a trade surplus for May of $8.99 billion, the third-largest on record.

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