The European Union and China on Monday reached an agreement to unblock some 77 million garments held up at European borders after Chinese textile imports broke through 2005 quota limits.
EU Trade Commissioner Peter Mandelson and his Chinese counterpart Commerce Minister Bo Xilai, in Beijing, reached a deal on future quota limits, allowing some 77 million garments into the EU.
“We have found a satisfactory and equitable way of dealing with the overshoots in certain of the textile categories,” Mandelson said in a statement, adding that he hoped it would be possible to quickly unblock goods at EU borders.
He said the disagreement over Chinese imports had raised important issues of free trade versus protection. “China and Europe are not, have not and will not be at ’war.’ We need each other - and access to each others market,” said Mandelson.
The EU’s 25 member states will have to approve the deal before the clothing can go on sale in European stores.
The agreement raises import limits temporarily to allow in excess clothing amid growing concern that a flood of cheap Chinese goods undercuts European producers.
Half of the garments would be allowed in outside quota rules on the EU’s account and half would be counted against limits for this year and next year, effectively reining in Chinese export growth, EU trade official Simon Fraser said in Brussels.
“It implies that for China the growth rates they accept for 2005 and 2006 in those categories will be lower than the growth rates that were originally envisaged,” he said.
China will not issue any more export licenses for sweaters, trousers or bras this year and has agreed to subtract 24 million sweaters, 9 million trousers and 6 million bras from the 2006 quota. This will cut planned export growth from 10 percent to between 5 and 7.5 percent, said Ignacio Garcia Bercero, another EU trade official.
Fraser said it was not a perfect deal for the Europeans but the Chinese had made a “significant contribution” in agreeing to count excess imports against future quotas. The June 10 trade deal with China still stands, he said, and the new arrangements should mean more stability for producers on both sides.
European governments still have to approve the details of how the extra imports should be unblocked. Talks broke off in Brussels on Friday and are due to continue Monday and Tuesday.
Mandelson said Friday that European governments had reached “broad agreement” behind his proposal to allow in goods ordered and shipped during the month following the June trade pact.
European retailers have lobbied hard for the garments to be released, claiming stores would not be able to stock fall and winter clothing lines ordered from China.
The British Retail Consortium welcomed the deal unblocking the goods but said was worried that in the long-term it would lead to shortages of Chinese clothing and higher prices for the consumer.
“While most larger retailers have a broad spectrum of suppliers and are not unduly exposed to China, other retailers will be forced to look at sourcing from other low cost countries,” said the group’s director general Kevin Hawkins.
The European Commission has placed 10 categories of Chinese textile products, including T-shirts, sweaters and bed linens, on a watch list and recently opened an investigation into claims that Chinese imports of CDs and DVDs were unfairly undercutting European producers.
It has also started an investigation into claims that Beijing and India are dumping shoes on European markets, and has threatened punitive customs duties on the imports to raise shoe prices.
Chinese shipments of sweaters, trousers and other low-cost clothing soared after a worldwide quota system expired on Jan. 1.
The EU negotiated new and higher limits with China in June but the month-long delay before the restrictions came into effect meant many importers placed huge orders in an attempt to get quota-free goods into Europe before the deadline.
Imports of sweaters, men’s trousers, bras, blouses, T-shirts and linen cloth overshot the new limits barely weeks after the deal was signed.
Meanwhile, U.S.-Chinese talks on a dispute over American efforts to restrain surging imports of Chinese underwear and other textiles broke down last week.
The U.S. government announced Thursday that it was re-imposing quotas in two categories of Chinese clothing and textile imports after its negotiations in Beijing failed to make progress. The administration said that it would limit imports of fabric made with synthetic filament threads as well as bras and other undergarments.