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China, EU Solve Textile Issue Through Consultations

Weeks after being stockpiled at European borders, millions of Chinese garments finally found their way into European Union (EU) markets, marking an end to the months-long standoff between the two trade giants.


Ever since the World Trade Organization's longstanding system of textile quotas expired at the beginning of this year, European textile producers have been lobbying for a new form of limits on what they claim to be a "flood of cheap Chinese garments."


Under pressure from domestic manufacturers, the European Commission, the executive arm of the 25-nation EU, sought a deal with China in June to re-impose restraints on 10 categories of textile goods.


After consultations, the two sides eventually signed an agreement expiring in 2007 which gives European manufacturers time to adjust to a world of unfettered competition.


The deal, however, seemed not to have taken into account the European bloc retailers. Many of them ordered Chinese textiles without knowing of the impending new limits.


The consequences were dire: barely a month after the deal, sweaters imported from China exceeded the restated quotas; another week later, men 's trousers, blouses, bras, T-shirts and flax yarn hit the limits one after another.


Up to 80 million garments were reportedly piling up in European warehouses and customs checkpoints. Retailers began to complain that their shelves would be bare for the autumn and winter seasons unless the withheld clothes were allowed in.


EU governments were split along predictable lines: nations with big textile industries, such as France and Italy, fought fiercely to protect the quotas; Nordic countries with small manufacturing industries supported their retailers to get cheap Chinese apparel.


Again facing mounting pressure, the embarrassed European Commission took the issue to Beijing.


EU Trade Commissioner Peter Mandelson appealed to the Chinese government to "share the burden," while admitting there is no legal basis for China to rework on the June agreement.


Marathon-style talks were held in Beijing, resulting in China and the EU agreeing to "a satisfactory and equitable solution."


Under the agreement reached on September 5, all blocked Chinese textiles would be allowed to enter the EU markets under the principle of equally sharing the burden.


The deal shows that China and the EU have the political will to solve their trade disputes by negotiations and friendly consultations, analysts say.


"As a matter of fact, the EU and Chinese economies are quite complimentary, both sides could have closer economic cooperation through mutual-beneficial trade and specialization. In the long run, both sides can reach a win-win situation," Europe Investment Bank President Philippe Maystadt told Xinhua.


Maystadt warned that the EU should speed up the industrial modernization and structural reform to transform itself into a knowledge-based, innovation-driven economy.


The Europeans should also give up competing with China in the low-tech, low-skill textile industry since quotas only delay the inevitable, according to the Economist, a London-based weekly magazine.


"It is hard to see how rich-world workers can compete with the low wages that their counterparts in poor countries are willing to accept," said the Economist.


"And for Europeans, the outcome seems likely to embody the classic conundrum of protectionism: it will help producers a bit, but it will cost retailers and consumers dearly," it concluded.


(Xinhua News Agency September 9, 2005)


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