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Last Updated: Monday, 5 September 2005, 08:47 GMT 09:47 UK
Q&A: Chinese clothes exports to EU
Chinese-made clothes on display
China exceeded the EU's clothing quota level in less than two months

Millions of textile and clothing goods from China are being held in European warehouses, because of a dispute over import quotas.

The quotas were introduced earlier this year after a sharp rise in import volumes, which the EU feared would harm European producers.

A deal to unblock the goods was reached on 5 September, during talks between the European Commission and the Chinese government.

However, the agreement still needs the approval of the 25 EU member states.

What was agreed on 5 September?

The proposal is that all the goods in European warehouses should be released - but that half of them should count against the quota agreed for 2006.

What is the current situation in the warehouses?

About 75 million items of Chinese textile goods are currently waiting to be let in to the EU.

They represent orders which have been fulfilled - but are not allowed in because China has already exceeded the annual quotas agreed in June.

Why is Europe limiting Chinese clothing imports?

The global textile industry has been in flux since the beginning of 2005 after a quota system which limited worldwide clothing sales for 30 years was 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%.

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.

Has Europe been united on how to solve the problem?

Far from it.

Obviously people want less expensive goods... but then you have got textile producers across Europe who are worried about their jobs and unfair competition
UK PM Tony Blair

The interests of Europe's retailers are diametrically opposed to those of its clothing manufacturers, which 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.

Some governments - including France, Spain and Italy - have taken the producers' side, others - including Germany, the Netherlands and Sweden - have supported the retailers.

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 exports to the EU, 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.

Chinese clothing stall
Chinese-EU trade was worth 174bn euros in 2004
By the beginning of August, limits on imports of pullovers and trousers had already been met.

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 were fears that, if no deal were reached, the dispute would result in empty shelves and disappointed consumers in Europe this winter.

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

If EU governments approve the latest deal a crisis will be averted, though there could be a delay in getting some autumn goods into the shops.

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