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2005-09-04 | All chapters

EU's Mandelson Optimistic About China Textile Pact
Nerys Avery, Bloomberg, 4th September 2005

European Union Trade Commissioner Peter Mandelson said he's optimistic an accord with China on textiles can be reached as he struggles to resolve a trade spat that's left millions of Chinese garments blocked at EU ports.

Mandelson is seeking a concession from China that would induce EU governments to approve his proposal to release the clothing, destined for retailers including Hennes & Mauritz AB and Marks & Spencer Plc. The EU on Sept. 2 put off a decision on whether to unblock the goods as southern European textile- making nations resisted his plan to raise 2005 import quotas on goods from China.

"I hope we will get an agreement, if we are going to get an agreement at all, before'' the EU-China summit starts in Beijing tomorrow, Mandelson told reporters in the Chinese capital today after three hours of talks with China's Commerce Minister Bo Xilai.

The accumulation of 400 million euros ($501 million) of garments including Chinese pants, shirts and bras at the 25- nation EU's border prompted Mandelson to try to lift caps he and Bo fixed in June for three years. The deal with China, the world's largest textile exporter, followed the Jan. 1 end of four decades of World Trade Organization limits on exports of these goods.

Failure to reach a deal could strain the EU's trade relationship with China, whose textile and apparel exports to Europe rose 57 percent to $8.65 billion in the first half, according to Chinese government data.

No U.S. Accord

China agreed in June to limit the annual growth in shipments of 10 categories of garments to the EU to between 8 percent and 12.5 percent through 2007, after exports surged following the end of a global quota system. China has so far failed to reach a deal on quota limits with the U.S., its largest market.

"The EU negotiators unfortunately didn't take commercial considerations into account when they negotiated their agreement,'' Laura Baughman, a trade adviser at the U.S. National Retail Federation, said in an interview on Aug. 31. "Consequently, the goods that were already on order by European retailers were too large.''

Mandelson said last week he was seeking to win concessions from China to bring forward the initial quotas agreed in June for future years and add them to this year's quotas. This could release the blocked textiles for shipment to retailers.

'Different Options'

EU governments including Spain and France resisted Mandelson's call to release the impounded garments without having any deal with China on cutting future quotas. Filiep Libeert, president of Euratex, a Brussels-based group of textile producers that lobbied for the restrictions, called Mandelson's proposal "unacceptable.''

Mandelson declined to say today what the EU is offering China.

"There are different options, different permutations,'' he said as he returned for more talks with Bo, after giving a speech to the EU Chamber of Commerce in China.

Today's meetings follow five days of talks between EU and Chinese officials in Beijing between Aug. 25 and 29, and a 3 1/2-hour phone conversation between the two trade leaders on Aug. 31. China has rejected Mandelson's initial plan to reduce quotas for future years in return for raising the ceiling for 2005.

'Rock and Hard Place'

"Mandelson is between a rock and a hard place,'' Henry Overman, a researcher at the London School of Economics and a member of the Centre for Economics Policy Research, said on Sept. 2. "Running these kind of quotas is a messy business.''

In the first half of 2005, China's total exports to the EU soared by 39 percent, while the EU's exports to China rose by 2 percent, Mandelson said in his speech to the EU Chamber today.

"That's a wake-up call,'' Mandelson said. "We have some problems in Europe sometimes, addressing public fears about the rise of China. It's feeding protectionism in Europe. That protectionism or that mood of protectionism will be reduced or contained if people feel there is a proper balance of opportunity and proper access to China's market.''

The chamber, which represents more than 700 EU companies operating in the world's seventh-largest economy, said today lack of protection of intellectual property, government influence over investment, preferential treatment for domestic companies and non-tariff barriers such as technology standards make it more difficult to compete fairly.

Intellectual Property

"European companies find it difficult to compete on a level playing field,'' chamber president Serge Janssens de Varebeke said today at a press conference to issue the organization's annual report on China. "There are underlying concerns, especially over the protection of intellectual property rights.''

Mandelson's meeting with Bo comes as Chinese and European leaders, including Premier Wen Jiabao and U.K. Prime Minister Tony Blair, gather in Beijing for an annual summit to discuss a range of political, social and trade issues, including the EU's arms embargo and human rights.

"Even if we don't settle the textile issue by this weekend, it will not prevent the success of the EU-China summit,'' Serge Abou, the EU's ambassador to China, said at a Sept. 2 briefing in Beijing. "We will be signing many accords and agreements ranging from social to political to trade. It will be a very successful summit, I assure you.''