Beijing Scraps Its Own Penalties On Textile Exports

Sydney Morning Herald

Tuesday May 31, 2005

Hamish McDonald Herald Correspondent in Beijing

China has angrily cancelled the tariffs it had imposed to slow its own textile and clothing exports after the European Union took a growing trade dispute to international arbitration and the United States widened its emergency import quotas.

The Ministry of Finance said export tariffs would be cancelled on 74 textile items, including those on which tariffs were to have been quadrupled from this week.

The ending of China's voluntary restraints comes amid an escalating trade row over its surging textile and apparel exports to developed countries since global quotas ended on January 1.

As well as a two-front trade war on textiles, China is resisting strong and explicit American pressure to revalue its currency, the yuan.

On Friday it was dismayed that despite its pre-emptive move, the EU had asked for formal consultations under World Trade Organisation rules on exports of T-shirts and flax yarn.

The EU said imports of Chinese T-shirts had risen 187 per cent in the first four months of the year over the same period last year, and flax yarn imports were up 56 per cent.

The EU's move triggers a procedure that requires China to limit exports in these categories to a level no higher than 7.5 per cent above the volume entering the European market over the 12 months to February.

Earlier this month, the US imposed import quotas on Chinese-made cotton trousers and other goods which also limit annual growth to 7.5 per cent - well below the 54 per cent jump reported this year by the US Commerce Department.

On May 18 it stopped sock imports from China for six months, after the stipulated annual quota had been filled.

China's Commerce Minister, Bo Xilai, said the Chinese export surge was a short-term phenomenon.

And the Europeans and Americans were partly to blame, he said, because they had retained 70 to 90 per cent of import quotas "until the last moment" during what was supposed to be a 10-year phase-out.

"It [the export surge] was normal if people consider that the world trade regime was undergoing a transition from a distorted one to one of normal free trade," official media quoted him as telling the visiting Spanish Trade Minister, Jose Montilla.

Economists point out that much of the trade surge has come at the cost of third-country textile exporters, including many smaller Third World countries that had built garment industries on the basis of quotas.

Andy Rothman, of CLSA Asia-Pacific Markets in Hong Kong, noted that while Chinese textile and garment shipments to the US surged 62 per cent in the first two months of 2005, overall imports in this sector rose only 15 per cent.

© 2005 Sydney Morning Herald

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