Quotas ‘no solution’ to China exports

RESTORING import quotas that were abolished at the start of the year is not the solution to the European Union’s efforts to quell surging textile exports from China, European Trade Commissioner Peter Mandelson has said.

Bowing to pressure from more than a half-dozen EU governments, Mr Mandelson gave China a final chance to limit exports of T-shirts and flax yarn to the bloc before the EU imposes quotas. The US has also tried to protect domestic industry from Chinese garment exports that have grown since 40-year-old quotas were lifted on January 1.

The transition to open markets “has to be managed”, Mr Mandelson said yesterday at the World Economic Forum in Jordan.

“We have to make it smooth. It is not a question of restoring quotas. In the short term, we have to take steps, hopefully by negotiation, to ensure that we move more slowly from one period to another.”

China yesterday agreed to raise export tariffs on 74 products starting June 1. While the increases are five times higher than previous taxes for most of the items, US and European businesses said the duties won’t curtail the growth in exports. China has threatened to drop export taxes on textiles should other governments impose caps through quotas.

Under China’s 2001 World Trade Organisation accession accord, WTO members are permitted to impose a 7.5% cap on growth in exports of Chinese textile and apparel products in cases of market disruption. The provision lapses at the end of 2008.

China is the world’s largest clothing exporter, shipping about $97.4 billion of apparel worldwide last year, according to the China National Textile & Apparel Council in Beijing. Prices for Chinese apparel in 2004 were 58% below those offered by suppliers in countries such as Bangladesh and India, the US textile industry estimates.

Given China’s currency advantage and its low labour costs, Mr Mandelson said, the impact of Chinese exports in the textile industry will be “considerable” in the short term.