Updated: 2005-06-10
European Trade Commissioner Peter Mandelson, in Shanghai for last-minute talks with China over its surging textile exports, warned on Friday that the European Union would take action if no deal was reached.

China has until Saturday to agree to curb the rise in exports of T-shirts and flax yarn to the European Union to 7.5 percent compared with the previous year, or face the imposition of temporary quotas on these products within days.

The United States has already slapped caps on seven textile products, provoking an angry reaction from Beijing.

"We hope to achieve an agreement with the Chinese government about what we are going to do about the textiles explosion which is affecting Europe and so many developing countries," Mandelson told reporters after arriving in Shanghai.

"If we don't make an agreement we will have to take other measures," he said without elaborating. "This question has been dragged on over many days. We have a limited opportunity."

Mandelson is expected to have lunch with Chinese Commerce Minister Bo Xilai and then hold talks in the afternoon, an EU diplomat said.

Talks would continue on Saturday if no agreement was reached on Friday, the diplomat said.

Bo said on Thursday that China would protect the rights of its textile industry in talks with the United States and EU, but also act in line with World Trade Organization (WTO) rules.

Bo has already said he reserves the right to ask the WTO to adjudicate if China cannot reach agreement with Brussels and Washington.

After joining the WTO in 2001, China agreed to let member states restrict imports of clothing and textiles if a sudden surge in shipments threatened to disrupt their markets.

RAPID GROWTH IN CHEAP IMPORTS

The rapid growth in cheap Chinese textile imports caused the United States to reimpose quotas on seven categories of clothing imports from China in mid-May, while the European Union has warned Beijing to cut its textile exports or face formal curbs.

A woman checks suits at the Youngor Group's textile factory in Ningbo, in China's Zhejiang Province June 8, 2005. European Trade Commissioner Peter Mandelson, in Shanghai for last-minute talks with China over its surging textile exports, warned on Friday that the European Union would take action if no deal was reached. [Reuters]
China is keen to support an industry that employs 19 million people and is a vital cog in its export-oriented economy.

U.S. curbs may cost China $2 billion and affect the lives of 400,000 workers, a senior official at a Chinese textile industry trade association was quoted as saying in state media on Friday.

Another official, secretary general Wang Yu of the China Chamber of Commerce for Import and Export of Textiles, told Reuters: "EU quotas would inflict about 1.4 billion yuan in immediate losses on the industry and force the lay-off of up to 100,000 workers.

"I hope the meeting achieves a fruitful result."

EU diplomats have said Mandelson's visit is a last-ditch attempt to reach a negotiated solution before the imposition of so-called "safeguards" allowed under the terms of China's entry into the WTO in 2001.

EU imports of pullovers and men's trousers jumped by over 400 percent in the first quarter of this year, while T-shirt imports rose by 157 percent to more than 150 million.

Shoes have become another source of friction, with the EU saying this week that imports of six Chinese footwear products leapt nearly 700 percent in the first four months of the year.

But Mandelson will have to haggle over what proportion of China's textile exports could be covered by a mutual agreement limiting shipments, bidding Beijing up from its position that this should affect only T-shirts and flax yarn.

Last weekend, U.S. Trade Representative Rob Portman and U.S. Commerce Secretary Carlos Gutierrez held talks in Beijing but achieved no breakthrough.