Clothing row divides Europe

By Stephen Mulvey
BBC News website

The dispute over what to do with the EU's Chinese "mountain" of pullovers and bras is pitting one group of European countries against another.

Chinese clothes threaten some EU producers more than others

Not for the first time, there are signs of a North-South division, with the southern members keenest to ensure that agreed Chinese import quotas are rigidly adhered to.

Northern members are more inclined to get over the problem by just expanding the 2005 quota.

The European Commission has the hard task of finding a position that is acceptable to both sides - and to China.

HAVE YOUR SAY It is in our interests for the Chinese to prosper Woody, Sheffield Send your comments on the textile quotas

On Thursday it will discuss trade commissioner Peter Mandelson's proposal to free the 80 million items of clothing currently held in European warehouses, and take a formal decision.

This will then go to the member states for approval. If they continue to disagree, it could be up to the UK - as president of the Council of the European Union - to find a compromise.

High value

Members of the "northern" group - Denmark, Finland, Germany, the Netherlands and Sweden - either prefer free trade to protection of the EU market on principle, or champion the interests of clothing retailers rather than those of clothing producers.

NORTHERNERS Fewer workers in textile and clothing industry than any of the other 10 "old" EU states All have strong fashion retail industries Sweden is home to Hennes and Mauritz, Europe's biggest clothing retailer The Netherlands is home to C&A, Europe's third biggest clothing retailer

Many of their own textile and clothing firms make high-tech fabrics, or occupy high-value niche markets.

Their retailers have often outsourced production to China, and now have large quantities of stock sitting in warehouses.

Low cost

By contrast, members of the "southern" group often have clothing sectors that are directly threatened by cheap Chinese imports.

SOUTHERNERS Half of EU textile and clothing (T/C) jobs are in Italy, Spain and Portugal (2002 figures) Portugal, Greece and Italy have highest proportion of T/C workers in EU (more than 10%) Portugal, Greece and Spain have more workers in clothing sector than in less vulnerable textile sector Portugal, Spain, Greece and Italy have least productive T/C industry in the "old" EU of 15

Voters, if not governments, in these countries - France, Greece, Italy, Portugal, Spain, and, further east, the Czech Republic, Lithuania, Poland and Slovakia - are also sometimes unconvinced about the benefit of free markets.

France also has a protective attitude towards low-cost clothing producers in North Africa.

The five Western European members of this southern group all wrote to the European Commission earlier this year appealing for action to stem the tide of Chinese clothing imports that followed the lifting of restrictions on 1 January.

Honest broker

By contrast, government ministers from Denmark, Finland, the Netherlands and Sweden, jointly wrote an article for the Financial Times in August, arguing for a solution that would ensure the stockpiled clothes reached the shops by early September at the latest.

I have never disguised, never disguised, the inherent difficulties in introducing restrictions to trade. My caution was well known EU Trade Commissioner, Peter Mandelson

"Of course, the best way to do that would be to renounce protective trade measures altogether, or at least limit their application to situations of manifestly unfair competition," they said.

The UK is presumed to belong to the "northern" pro-free-trade group, but has to keep quiet because of its obligation, as EU president, to play the role of "honest broker".

Interestingly, the divide appears to reach into the European Commission itself.

Peter Mandelson said on Monday: "I have never disguised, never disguised, the inherent difficulties in introducing restrictions to trade. My caution was well known."

According to the Financial Times, Mr Mandelson only embraced the idea of Chinese textile quotas under pressure from his boss - Commission President Jose-Manuel Barroso.

Mr Barroso has a reputation for being an advocate of free-trade, but is also a former prime minister of Portugal.

'Best balance'

It would be possible to overstate the differences between the two groups.

When the latest European Commission delegation was sent to Beijing to negotiate a way out of the crisis, all member states except Denmark wanted a solution within the parameters of the memorandum of understanding signed in June.

Sometimes known as the Shanghai agreement, this limited growth in 10 categories of Chinese textile goods to between 8% and 12.5% per year until 2007.

"They regard that deal as the best balance of the competing pressures within the Council," an EU official said.