China could strike back in Bra Wars sequel

By Stewart Fleming

Date: 08/09/05

The prospect is looming of further trade conflicts between the EU and China in the wake of the textile dispute.

The policy of the EU Trade Commissioner Peter Mandelson of opening trade will be tested across a range of imports.

Trade officials cite shoes as the next point of conflict but information technology equipment and even cars could be an issue in the not too distant future.

Some Brussels trade experts say that Mandelson's predecessor Pascal Lamy, before he left office last November, had spotted the need for managing China's impact on global textile trade when the global quota regime ended in December 2004.

But managed trade is anathema to Mandelson. In a speech in Beijing on Tuesday (6 September), a day after the announcement that a deal (of sorts) to resolve the textiles dispute had been reached at the EU-China summit, Mandelson made it clear that he was intellectually opposed to the sort of managed trade regime which he felt he had been forced to adopt in the textiles dispute.

"I am not, as a matter of basic conviction, in favour of intervention in markets or managing trade," Mandelson said. "In the long run this is a cul de sac...in the short term it can bring desirable relief, but, as we have seen [in the textiles case] it can have unforeseen consequences."

He stressed that he had intervened in the textile market with great reluctance. "I had no choice last June but to find some temporary relief for European producers who, whatever the reason, were against the wall," adding, "I refused to do it unilaterally...I do not believe that this is the way to respond to China."

In a protectionist 'burden-sharing' agreement reached this week, the EU said that it would accept half the blocked goods unconditionally and China agreed that it would include the other half either in its 2006 quota (so reducing 2006 export growth) or in unfilled 2005 quotas for other products.

Simon Fraser, Mandelson's chef de cabinet, said on Monday (5 September) that the textile problem had arisen in part because the sheer volume of Chinese imports was not, and could not, have been anticipated. "We are dealing with an unprecedented situation because of the sheer exporting power of China...what other country in the world could have manufactured and exported to Europe around 135 million sweaters in a few weeks?"

At a meeting in Brussels on Tuesday, however, the Foreign Trade Association, a free market lobby representing major European retailers, said that, irrespective of the scale of imports, the Commission's trade department (DG Trade) was ill-prepared to implement a managed trade deal.

Jan A. Eggert, the FTA secretary-general, said that for months the textile section in DG Trade had been inadequately staffed. The June deal, he said, was put together in a rush and China was not able to put in place a control system quickly enough. "Without dual EU-China controls the monitoring system could never have worked," he said. The figures being used for import numbers were based on crude "surveillance reports" and accurate figures would not be known until next year, he said. Ferry den Hoed, FTA president, said that there had been no absolute increase in textile imports into the EU this year, just a surge in the volume coming from China.

• Stewart Fleming is a Brussels-based freelance journalist.

Author suggests that the prospect was looming of further trade conflicts between the EU and China in the wake of the textile dispute resolved in September 2005 and that the policy of the EU Trade Commissioner Peter Mandelson of opening trade would be tested across a range of imports.