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Last Updated: Tuesday, 24 May, 2005, 21:10 GMT 22:10 UK
No end to China-EU trade deadlock
China's textile negotiator Gao Hucheng
China has threatened to withdraw its own tariffs on exports
Talks in Brussels between the European Union and China aimed at curbing a surge in Chinese exports have shown no sign of a breakthrough.

EU trade chief Peter Mandelson and China's textile negotiator Gao Hucheng will continue the talks on Wednesday.

The EU and US are threatening to impose quotas on China, which they accuse of flooding markets with cheap textiles.

But as the talks began, China said it would axe plans to raise textile export tariffs if the EU and US impose quotas.

"The tone of the meeting was constructive. Talks are continuing," an EU official said after the one-hour meeting.

Sanctions threat

The EU may decide on Wednesday whether to take further measures to contain the surge in China's exports.

If the US and the EU formally carry out restrictions on any of these categories, we will not impose tariffs on the items in question
China's Commerce Ministry

However, according to reports an unnamed EU official said that if there is some progress during the talks, Brussels may wait until the end of the month before deciding whether to take restrictive measures against Beijing.

Both Europe and the US have raised concerns that cheap Chinese imports will lead to bankruptcies and massive job losses.

The clash has been exacerbated by US claims that China is deliberately keeping its currency undervalued in an attempt to boost exports.

To ease the situation, China had agreed to raise export tariffs on goods in 74 categories by as much as five times.

However, ahead of the talks its commerce ministry warned: "If the US and the EU formally carry out restrictions on any of these categories, we will not impose tariffs on the items in question."

Upping the pressure

The EU says it wants to work with Beijing in finding a solution.

It wants to launch formal consultations with China over T-shirts and flax yarn, a move that would allow it to step up pressure on China under World Trade Organization (WTO) rules.

Under WTO rules, the EU could impose import limits within 15 days of the formal start of negotiations if China fails to curb its exports.

The US has already imposed limits on Chinese imports, claiming that its textile industry has lost more than 16,000 jobs since the start of this year.

Tensions surfaced after the Multi-Fibre Agreement, which governed the global textile trade, was replaced by a new system at the start of this year.

Following its entry into the WTO in January 2002, China agreed to allow countries to impose limits on imports for three years should markets become distorted.

According to figures from the US and EU, imports from China have surged since January and are now putting pressure on local producers.


BBC NEWS: VIDEO AND AUDIO
How the dispute over textiles has escalated



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