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Last Updated: Thursday, 25 August 2005, 15:46 GMT 16:46 UK
EU-China seek answer to textiles row

By Quentin Sommerville
BBC Shanghai Correspondent

Shoppers at a Chinese textiles market
The EU fears it will be flooded by cheap Chinese-made garments

The millions of bras, sweaters and trousers stranded in European ports won't be going anywhere just yet.

After eight hours of what have been described as "constructive talks", European Union negotiators and their Chinese counterparts have agreed to come back for a second day.

The EU says it is looking for a pragmatic solution to the problem of stranded Chinese clothing stocks.

But the negotiating team in Beijing has many masters to please. It is worth remembering that the quotas were introduced to protect EU manufacturers from being overwhelmed by low-cost Chinese imports.

Negotiations will begin early on Friday morning in Beijing, and a deal is still believed to be possible.

However, if the Beijing meeting does produce an agreement, it will still have to be approved by EU member states.

Clothing dilemma

Those with large garment industries - Spain, Portugal and Italy - have already said they are reluctant to allow more low-cost Chinese imports across their borders.

And those with large retailers - the British, Germans and Swedish - are anxious that the trapped clothing stock makes it out of the warehouses and into the stores.

HAVE YOUR SAY
The Chinese manufacturers are not forcing anyone to buy their products
Kpdodo, Mauritius

The Chinese negotiators face a dilemma of their own.

The likelihood is that the EU will offer to bring forward some of next year's quota allowances - and possibly some from 2007 - into the current year.

That was the suggested solution from EU Trade Commissioner Peter Mandelson when the sweaters quota reached its limit earlier this month.

Growing frustration

EU officials did not get round to expanding that category's quota, though. Instead, they were overwhelmed with other quotas reaching their limits.

But where would Mr Mandelson's suggestion leave Chinese exporters in twelve months time?

"It would be like eating dinner at breakfast time," explained one unnamed Chinese official.

There is a growing frustration among the Chinese. Smaller manufacturers are letting staff go, as quota after quota approaches its limit and their business dries up.

That frustration is evident in the editorial columns of government newspapers.

One state-owned title, China Daily, has accused the EU of old-fashioned protectionism and of damaging the rights of its consumers.

Trade barriers

A cartoon in another newspaper depicts four naked Westerners crowded together on a dockside, waiting for their (Chinese) ship to come in.

Most newspapers, reflecting the views of their political masters, have called for a free and liberalised market in the clothing trade to be agreed as soon as possible.

That is the deal the Chinese thought they had signed up to on 1 January this year. But instead of trade barriers disappearing, many manufacturers complain they have a quota system almost more complicated than before.

In the medium to longer term there is agreement on both sides.

EU officials admit, at least privately, that local producers will not be able to see off the China threat forever.

"The China price is just too good - it's overwhelming," one European Commission official told me today.

And the current quota deal is only a temporary measure, due to expire in 2008. For China's clothing manufacturers, that date cannot come soon enough.


BBC NEWS: VIDEO AND AUDIO
Why retailers say the row threatens sales



SEE ALSO:
China-EU talks to continue Friday
25 Aug 05 |  Business
China textile bottleneck tightens
23 Aug 05 |  Business
Stores angry at EU clothing curbs
18 Aug 05 |  Business
US-China on verge of textile deal
18 Aug 05 |  Business


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