Textile industry concerned over predatory Chinese import prices

Date: 02/12/04

By Stewart Fleming

European textile industry representatives are to meet Trade Commissioner Peter Mandelson later this month amid concerns about predatory pricing of textile imports from China when the global textile trade quota agreement expires at the end of the year.

Trade issues will be discussed at next week's (8 December) EU-China summit. But with the second meeting of the EU-China Textiles Trade Dialogue having just taken place in Beijing on 23 November, textile trade is not expected to be a major focus for discussion.

Around the world, however, there are growing fears about how Chinese exporters will respond to the elimination, on 1 January 2005, of the system of country-by-country quotas. The system has regulated the &036;495 billion (e373bn) trade in textiles and apparel, providing protection to domestic industries from international competition.

Ten years ago agreement was reached to phase out and then eliminate the textile quota system set up in the 1960s. But at that time negotiators did not anticipate that China would emerge as a dominant supplier of manufactured goods.

Today there are fears that, without quotas, Chinese textile exports will swamp markets. The World Bank has estimated that around &036;200bn (e151bn) in clothing production for export markets will shift to China over the next few years.

If this forecast were to prove accurate, China, already the world's largest textile and clothing manufacturer, would have grabbed almost half of the global clothing market. This would hit not only the textile industries of industrial countries but also developing countries such as Bangladesh.

The EU textile industry employs 2.7 million workers producing goods worth 227bn euro, EURATEX, the industry's main lobby group says.

Since it joined the World Trade Organization in 2001, Chinese exports of clothes to the EU have increased by 18% - to 12.3bn euro in 2003. This has made China the biggest EU supplier. EU exports to China were 450m euro in 2003.

The impact of Chinese imports has been dramatic in certain textile segments where quotas have been phased out since 2001. In 2002, China had claimed a 55% share of the EU anorak market, a 50% share of the tracksuit market and 33% of the woven underwear market, according to EURATEX.

The EU industry believes that China has been slashing prices to uneconomic levels to grab market share and worries that more is to come. Filiep Libeert, president of EURATEX, warned earlier this month that EU producers face “massive increases of absurdly priced goods from China”.

Industry officials say that they are happy with the system that the European Commission has put in place to monitor Chinese textile imports. They note, however, that Washington has already begun to take pre-emptive action to protect the US textile industry. They say that they will press for safeguards if import surges into the EU from China indicate that they are being subjected to unfair competition.

• Stewart Fleming is a Brussels-based freelance journalist.

Article reports on fears in the European textile sector that the abolition of country-to-country quotas on 1 January 2005 would swamp the EU market with Chinese imports.