Concern over US-China textile row

THE US is playing with fire by imposing trade tariffs on Chinese clothing imports Ulster Bank financial markets economist Niall Dunne warned yesterday as China retaliated.

"We've long warned that the US administration, coming into an election year, could take economically unsound steps in an attempt to win the November 2004 presidential election. However, we did not expect them to take such steps a year ahead of the election.

"America has dangerously escalated its protectionism, by imposing tariffs on Chinese textile imports. America really is playing with fire, since the Chinese are one of America's principal creditors without Chinese inflows into the US bond market, the American current account deficit would in all likelihood balloon," warned Mr Dunne.

China, already been hit hard by the US steel restrictions, hit back by canceling high-profile purchasing mission to the US for farm equipment. The European Commission said it is not planning to replicate US quotas on Chinese textile imports, which have sparked anger in Beijing. However, analysts said yesterday the sheer scale of two-way economic ties, plus Beijing's importance to Washington on the North Korean nuclear crisis and other geopolitical issues, meant both capitals had a stake in keeping a lid on the textiles row just as they seem to be doing over the value of China's currency.

Nevertheless, the Commerce Ministry in Beijing expressed deep regret about the Bush administration's decision to grant so-called safeguard relief on Chinese goods.

It reserved the right to protect its interests through the World Trade Organisation, which it joined in late 2001.

Meanwhile, the US said yesterday it remained committed to free trade despite the new quotas.

"The administration is committed to free trade and fully enforcing our trade laws," US National Security Council spokesman Sean McCormack told reporters covering a visit by US President George W Bush to Britain.

He said the government approved an industry request for protection, "consistent with our commitment to ensure that US companies have time to adjust to market disruptions caused by rising imports".