Manufacturing News

China and Europe Begin Talks on Backlogged Textiles

Seeking to press their advantage in a trade dispute with Europe, Chinese textile industry groups called for the quota limits on their products to be scrapped or curtailed as they began talks today with European Union officials.

A team of negotiators from Brussels arrived today to address what officials described as an urgent and serious problem with the quota system that was put into place two months ago.

More than 75 million sweaters, pants , bras and other garments are stuck in European ports after China filled its quota much faster than anticipated by the European side.

Under growing pressure from retailers, the European Union's trade commissioner, Peter Mandelson, called the problem a "serious glitch" on Wednesday and ordered his delegation to search for solutions.

Chinese exporters and European retailers have pressed the European Union to allow in those shipments waiting in European ports, claiming the quotas took effect earlier than first announced.

"We hope that both sides will use these talks to ease the backlog as soon as possible," said Sun Huaibin, a spokesman for the China National Textile and Apparel Council, which represents many of China's biggest clothes exporters.

The delayed shipments reflected "basic problems" with the quotas China and the European Union reached on June 10, Mr. Sun added. "The backlog shows the quotas are unrealistic and don't reflect the fundamental demand for Chinese garments," he said. "If the quotas can't be fully lifted, the next best solution is to raise them."

In Brussels, pressure mounted on officials to reach an agreement. .

The European Association of National Organizations of Textile and Fashion Retailers, which represents 400,000 retailers in Europe, urged in a statement today that a solution be found "without delay."

"Thousands of European textile and clothing retailers are damaged by the retroactive application of quotas on Chinese textiles," the group said, adding, "It should be ensured that all merchandise ordered before 12th July can be legally imported."

A spokeswoman for the European Commission, Amelia Torries, said: "Both sides see their interests in solving this problem as quickly as possible."

But officials in Brussels cautioned that the European negotiating team did not have a mandate to strike an agreement. .

Any alteration to the existing quota formula with China must be approved by the 25-member governments of the European Union before it can be put into effect.

This could prove difficult, said one official at the European Commission, which negotiates agreements on behalf of the European Union, because "the commission is caught between a very divergent number of views on this subject."

Europe pressed Beijing to agree to the quota restrictions in June, after worldwide restrictions on textile exports were lifted on Jan. 1 and textile exports to Europe leapt by 130 percent in the first six months of the year from the same period last year. They reached $8.7 billion by the end of June, according to Chinese customs statistics.

After an outcry from European garment manufacturers, the European Union and China agreed to quotas that limit Chinese export growth in 10 categories of clothing to 8 to 12 percent a year through the end of 2007.

China's Ministry of Commerce refused to comment on the emergency talks, but the state-run China Daily newspaper, which usually reflects official views, said today that the Shanghai agreement - hailed by both sides at the time as a cure to continuing friction over Chinese clothes exports - was flawed.

"It turns out the agreement will lead to a supply shortage and considerable losses for European importers and retailers," the newspaper said in an editorial. "The negative impact will become increasingly obvious in the long run."

The editorial also said the botched agreement should serve as a lesson to the Bush administration, which is trying to reach its own pact on Chinese-made garments and yarn before President Hu Jintao travels to Washington on Sept. 7.

"The E.U. experience is also useful for the United States, where protectionism is even more rampant, particularly in the textiles sector," The China Daily said.

Chinese trade officials have said Europe wants to transfer some of next year's quota volumes to this year, so that any additional exports beyond the limits agreed in June will come at the expense of exports in 2006.

Chinese officials, however, are seeking to win expanded quotas for this year and beyond.

Borrowing next year's volume "is not enough to solve the problem," an analyst with China's Ministry of Commerce, Mei Xinyu, told Agence France-Presse, "so a much better idea is to lift the quota by a very large scale."

The negotiations come as many European retailers, preparing to introduce their autumn clothing lines, are unable to take delivery of many of their Chinese orders, which are blocked at European ports until the dispute can he resolved.

Stranded shipping containers now hold Chinese-made clothes worth $43 million, or $52 million, and the ultimate losses to European retailers may climb to $800 million, the Chinese-language International Financial Daily said today.

The European delegation, led by one of Mr. Mandelson's senior trade officials, Fritz-Harald Wenig, made no comments to the media before the talks started this afternoon.

"It's an exchange of ideas and information to deal with the situation of the blockage," a press officer with the European Union's embassy in Beijing, Michael Jennings, said of the talks.

He said the discussions today would focus on "technical" aspects of the dispute.

Among the questions Beijing and Brussels must address are how to classify clothes that originate in China but pass through a third country for additional processing before reaching Europe, a spokesman for China's Ministry of Commerce said Sunday.

China does not count them as "Made in China," while Europe does. The comments were posted on the Commerce Ministry's Web site, which did not name the spokesman.

The limits that the European Union placed in June on Chinese exports for the rest of this year were between 200 percent and 400 percent higher than the volume allowed last year. In 2004, for example, China shipped 120 million T-shirts to Europe, while under the June agreement it was allowed to ship 450 million.

Yet still, China's intensely competitive garment exports have rapidly filled the limits for T-shifts and other clothing, and even Beijing trade officials have bemoaned the difficulty of reining in their exporters.

"In recent years, investment in China's textile industry has constantly expanded," the Ministry of Commerce spokesman said on Sunday.

Some Chinese exporters and European retailers engaged in "irrational behavior" to push through shipments before quotas took effect, he added.

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