China and Europe Settle Textile Issues -- U.S. Controversy Continues

After lengthy negotiations, China agreed to limit its growth in exports to the 25-nation EU of textiles and clothing products, keeping it to between 8 and 12.5%per year, from June 2005 to the end of 2007. On its side, the EU agreed to end action against Chinese products such as T-shirts, flax yarn, bed sheets, tablecloths and trousers, among other items.

To strengthen and enforce limits to the EU, beginning July 20, China will require its textile manufacturers to apply for a license that will base quotas on previous year exports. The license will be valid for six months and may be extended another three months. According to reports, in 2004, China’s textile exports to the EU were $10.79 billion, representing 6% of all EU trade with China, which totaled $177.3 billion.

Meanwhile, the U.S. has reacted to China’s export increase by imposing a 7.5% cap on textile imports from that country. Before the agreement, the EU had threatened a similar cap on Chinese textile imports. While being harshly critical of the U.S. cap, the Chinese government is full of praise for its agreement with the EU as a model that could work in settling international trade issues. The Chinese government notes that its textile industry employs 19 million people and is an important part of its economy. It speculates that the U.S. cap could lead to losses of $2 billion and put 400,000 people out of work.

On another note, Australia currently has tariff protection for its textile, clothing and footware that may be part of trade negotiations with China, slated to begin in July. Australian negotiators are looking for more favorable agricultural trade benefits with China and may be willing to ease textile limits to reach what it sees as more favorable overall benefits for the country. Australia’s trade minister, Mark Vaile, notes that his country had reached special deals last year with both the U.S. and Thailand that provides access to his country’s textile market while finding acceptance from indigenous clothing manufacturers.
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