China confident of clearing up EU textiles mess
(Reuters)
Updated: 2005-09-02 16:30

China's commerce minister said on Friday he was confident of solving a trade row with the European Union that has led to the pile-up of 75 million Chinese garments and cast a shadow over a bilateral summit next week, reported Reuters.

The bras, sweaters, T-shirts and other goods are held up at customs because they exceed ceilings agreed by the EU and China in June after a surge in Chinese exports led EU textile producers to demand protection.

"Currently the Chinese and the European sides are earnestly discussing this issue. I believe, and I am confident, we will be able to find a solution," Commerce Minister Bo Xilai told Chinese state television reporters.

Bo's EU counterpart, Peter Mandelson, expressed similar sentiments in Brussels on Thursday, even though EU officials said some countries were still demanding concessions from Beijing.

"I hope that China sees the value in reaching an accommodation over these teething problems," Mandelson said, adding that he hoped the goods could be unblocked by the middle of the month.

He said an agreement could come as soon as Friday, but he did not rule out the possibility of a deal not being reached.

Mandelson, who is due in Beijing at the weekend ahead of a China-EU summit on Monday, said he had spoken at length with Bo by telephone on Wednesday.

Bo acknowledged that the mess posed serious problems for European firms that had paid for goods that were now blocked.

"It's an extremely urgent issue for European retailers and importers. They're under a lot of pressure," he said.

PLAY BY THE RULES

But Bo, speaking on the sidelines of a trade fair in Changchun, northeastern China, said the EU only had itself to blame because it had unilaterally issued import licenses.

"China has strictly fulfilled its obligations," he said, referring to the June 10 deal, which capped annual growth in 10 categories of Chinese textile products at 8 percent to 12.5 percent a year for the period 2005-2007.

Mandelson, who is trying to balance the conflicting demands of European retailers and textile manufacturers, acknowledged China was under no legal duty to sacrifice its export quotas.

Beijing has so far refused to agree to EU suggestions that it bring forward 2006 quotas or reallocate quotas from other items that have not yet been filled.

Bo said market disruption had been inevitable following the abolition on January 1 of a 40-year-old system of quotas on developing countries' textile exports.

China, which enjoys immense economies of scale thanks to its modern factories and cheap labour, has seen a surge in exports not only to the EU but also to the United States. It grumbles that Western producers had known for a decade that the market would be liberalised in 2005 and had failed to get ready.

Washington, like Brussels, has slapped emergency curbs on an array of Chinese garment and textile exports.

As with the EU summit, the textiles tussle risks souring the climate of talks that President Hu Jintao will hold with President George W. Bush in Washington next Wednesday.

U.S. and Chinese negotiators have met four times since May to try to reach a comprehensive medium-term pact similar to the one with the EU, but the latest talks ended in failure on Thursday.

The U.S. Commerce Department swiftly responded by imposing extra curbs on Chinese bras and synthetic filament fabric.

Nevertheless, Bo said the talks with the United States had been positive. He said: "We all need patience and do things according to the rules."

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