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Last Updated: Thursday, 25 August 2005, 10:29 GMT 11:29 UK
Q&A: Chinese clothes imports to Europe
Chinese and European negotiators in Beijing
The two sides are locked in talks to try and resolve the dispute
European Commission officials are in Beijing for urgent talks to try and resolve an escalating dispute over Chinese clothing imports to Europe.

Brussels imposed temporary limits on imports of some Chinese textiles earlier this year to protect domestic manufacturers.

Quota levels for a host of items have already been used up, leaving a bottleneck of goods such as trousers and bras at EU ports which, under current rules, cannot be admitted.

The BBC News website examines the background to the dispute.


What is the current situation?

About 75 million items of Chinese textile goods are currently sitting in warehouses and ports around Europe waiting to be let in.

They represent orders which have been fulfilled - but are not allowed into Europe because China has exceeded limits on imports of certain goods which were agreed in June.

Brussels has acknowledged the scale of the problem.

Trade Commissioner Peter Mandelson has admitted to a "serious glitch" in regulations governing textile trade between Europe and China and said a solution must be found quickly.

Why is Europe limiting Chinese clothing imports?

The global textile industry has been in flux since the beginning of the year after quotas which limited worldwide clothing sales for 30 years were scrapped.

The move - part of a global drive towards trade liberalisation - has resulted in a huge increase in Chinese clothing exports with sales of certain items to the EU rising by up to 500%.

HAVE YOUR SAY
We in Europe cannot compete with Asia when it comes to the clothing and textile industry
Ian Kisberg, London, England

China's huge manpower and industrial capacity means it is able to produce large volumes of cheap clothing at much lower prices than producers in Europe.

Some developing countries are also finding themselves at a disadvantage.

However, as part of the rules governing China's entry to the World Trade Organization, Europe has the right to place temporary limits on textile imports to give European manufacturers time to adapt to the new trading environment.

In June, the EU and China agreed quotas on imports of 10 categories of clothing lasting until 2008.

Which goods are affected?

The agreement covers mass-market items most likely to cause "market disruption" by undercutting European-made products.

These are: pullovers, men's trousers, blouses, t-shirts, dresses, bras, flax yarn, cotton fabrics, bed linen, table and kitchen linen.

Under the agreement, growth in these exports is limited to 8-12.5% per year in 2005, 2006 and 2007.

Brussels believed the deal would permit reasonable growth in Chinese imports while giving European producers breathing space to prepare themselves for total liberalisation.

Why were the quotas breached so quickly?

Anticipating the quotas, Chinese and EU traders launched huge shipments of goods to get them into Europe before the regulation came into force and China established its new export licensing process.

By the beginning of August, limits on imports of pullovers and trousers had already been met.

Chinese clothing stall
Chinese-EU trade was worth 174bn euros in 2004

Blouses, shirts, bras and flax yarn soon followed suit, meaning that quotas had been breached in over half the targeted categories.

Companies which legitimately shipped goods now find that they cannot get import licences, leaving their goods "stranded".

Will shoppers be affected?

There are growing fears that the dispute could result in empty shelves and disappointed consumers in Europe this winter.

Retailers which rely on cheap Chinese imports such as T-shirts and bras are worried about stock shortages late in the year, and are putting pressure on governments to resolve the issue.

But the dispute has created a division between retailers and the European textile manufacturers, which also supply them.

Manufacturers have called for strict enforcement of existing quota rules.

They are worried about job losses resulting from cheap Chinese competition and point to figures showing a 30% decline in T-shirt production in Portugal and a 12% fall in Greece since January.

Are there any solutions on the table?

Brussels has suggested raising the 2005 quota level by using some of next year's allowance.

Up to 9% of China's 2006 pullover allowance could be brought forward.

This solution was initially opposed by some member states, although they are believed to have come round to the idea.

Still, it remains unclear how workable the idea would be.

Ultimately, Brussels may be forced to raise overall quota levels although there would be fierce domestic opposition to this.

China wants to ensure the current chaos doesn't happen again.

It considers the current agreement to be flawed - but is believed to be keen to resolve the dispute.


SEE ALSO:
China and EU launch textile talks
25 Aug 05 |  Business
China textile bottleneck tightens
23 Aug 05 |  Business
Stores angry at EU clothing curbs
18 Aug 05 |  Business
EU to relax Chinese sweater quota
04 Aug 05 |  Business


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