The European Union and China. Textile trouble

How the EU got into difficulty over Chinese clothing

AN EXAMPLE of the European Union at its finest: that was how Dominique de Villepin, France's prime minister, greeted the deal in June to limit Chinese textile exports to the EU. Ten weeks later, only a diehard Europhobe could be satisfied.

At the time, the EU's trade commissioner, Peter Mandelson, said that the deal (which caps annual growth in ten categories of textiles to 8-12.5%) “will give players on both sides clarity, certainty and predictability.” Now, retailers are livid after more than 80m items of Chinese-made clothing were impounded because they exceeded the quota. Licences to import a further 120m pullovers - almost twice the quota for the rest of the year and four times total sales in 2004 - have been granted by EU governments. These licences were issued in the month between the agreement's signing (June 11th) and the announcement of regulations (July 12th).

There is plenty of blame to go round. The European Commission could be faulted for letting a month slip between signature and implementation - a gap through which retailers stampeded. National governments (including those that most wanted protection for textile makers) could be blamed for ladling out so many import licences. The bigger fault lies in cack-handed efforts to gerrymander the market in the first place.

Whoever is to blame the result has been ambiguity, not clarity. It has left the EU in the undignified position of begging for China's help in healing a self-inflicted wound. In June, China's official Xinhua news agency called the deal “a new paradigm for settling [trade] differences”. Its commerce minister, Bo Xilai, said that “the Chinese government appreciates the EU's sincerity in solving trade disputes with China through dialogue and consultation, instead of taking unilateral action” (like you-know-who).

Yet when EU negotiators asked the Chinese to make it easier for them to unblock the goods by treating them as part of next year's quota, the Chinese balked. Agreeing to export restraints was hard. Agreeing to further restrictions just two months later because of European chaos is harder. All in all, the affair has demonstrated neither the virtues of managed trade, nor the EU's conviction that its partnership with China is highly valuable because, in Mr Mandelson's words, “we need to manage China's integration into the global economy in a sensible and smooth way.”