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Last Updated: Monday, 5 September 2005, 11:46 GMT 12:46 UK
EU and China reach textile deal
Chinese textile factory
Chinese factories have much lower costs than their European rivals
Talks between the European Union and China have ended with an agreement which could settle the ongoing strife over textile imports.

The deal - if approved by EU members - would see blocked goods released and counting against 2006 quotas.

Chinese textile imports have been piling up on Europe's borders thanks to quotas put in place in June.

The talks preceded a summit which began on Monday led by UK Prime Minister Tony Blair and Chinese President Hu Jintao.

Finding a balance

The deal would allow in the 75 million or so items currently stuck in customs warehouses and mid-journey - but would count half of them against next year's quotas.

The difficulty is that we are trying to balance a number of interests here
Tony Blair, UK Prime Minister

But it still needs to be agreed by the 25 EU member states, which are split over the effects of the original quota deal.

And although EU officials are treating the agreement as sealed, their Chinese counterparts sound less bullish.

Chinese Prime Minister Wen Jiabao told reporters that Europe and China would "eventually find a solution that is beneficial to both sides" - although he described the whole saga as a temporary blip in an important relationship.

Mr Blair said the strategic partnership between the two was "vital".

"The difficulty is that we are trying to balance a number of interests here because obviously people want less expensive goods," he told the BBC.

"But then you have textile producers across Europe who are worried about their jobs and unfair competition."

Peter Mandelson in Beijing
Mr Mandelson has been hoping for a swift resolution to the trade row

European producers fear their business will be wiped out, but retailers say they risk empty racks.

The US is also embroiled in a textile war of words with China, for similar reasons.

Unsuccessful negotiations in August have led to calls for Washington to introduce its own quotas, allowed under the terms of China's accession in 2001 to the World Trade Organization.

Retailers versus manufacturers

The EU quotas were announced in June to stem a huge surge in Chinese imports, which followed the end of a worldwide, decades-old textile tariff and quota system at the start of this year.

But as soon as the quotas were announced, retailers and wholesalers rushed to order supplies from China - using up the limits almost as soon as they were introduced.

France, Italy, Portugal and Spain, all of whom have large domestic textile industries, have been most opposed to any change in the quotas.

In contrast, several northern European states, including Germany and Sweden, are backing their retailers' calls for the garments to be let through.

Watch Tony Blair arrive in China for talks

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