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24-Aug-2005
Last Edited

EU To Propose New Trade Barriers Against Chinese Textiles
By Dow Jones

Jun 30, 2004, 06:26BRUSSELS -- Frightened by the rise of China's clothing industry, the European Union is set Wednesday to raise new restrictions on the country's cheap exports.

European industry representatives and E.U. politicians will recommend that China be dropped from a list of countries receiving preferential trade conditions, people familiar with the situation say.

As a designated "poor country," China currently receives rebates on import duties for the annual EUR2 billion textiles it exports into the E.U.

The change is designed to help other poor garment exporting countries such as Bangladesh , Laos and Cambodia. They are facing intense Chinese competition and feel they will be undercut once textile and clothing import quotas are abolished after January 2005.

Since China joined the World Trade Organization two years ago, its global textile market share has risen to 65% from 9% for some products. In the E.U., Chinese apparel accounts for 30% of all textile imports.

Other clothing manufacturers have watched aghast as China has inexplicably lowered prices of some exports by between 60% and 70%.

Until now, a quota system has provided some protection; it came into being after an international deal was struck in the 1994 Uruguay trade round. But from January next year the import quotas have to be abolished.

However, the E.U. will remain free under WTO rules to use trade barriers and charge tariffs instead.

"We will look to refocus our preferential treatment to those small countries that will not be able to compete once the quotas are gone," said an E.U. official close to the issue.

The E.U. also is demanding greater transparency in Chinese textiles pricing. In any other industry, governments would be able to use antidumping penalties against below cost or subsidized products.

The garment industry is one of the few exceptions. E.U. officials explained that variations between individual designs of shirts and trousers make calculating antidumping penalties almost impossible.

It is doubtful if the E.U. can implement its proposed rules by the time the quota system ends. E.U. ministers will vote on the proposals by the end of the year at the earliest.

A Chinese delegation will travel to Brussels to discuss textiles trade with E.U. officials in two weeks' time, a Chinese official said.

The delegation will also discuss the E.U.'s decision not to recognize China as a market economy. An E.U. investigation concluded last weekend, found China still micromanages its economy. The finding dealt a blow to Chinese ambitions to shake its official label of a non-market economy. Under that label, China is less able to fend off allegations of dumping cheap exports onto world markets.

"Chinese exports are very competitive in the European Union," the Chinese official said. "It's hard for Europe to accept this."
 

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