By  on June 5, 2007

GENEVA — Executives from the European Apparel & Textile Organization said last week that the end of quotas this year on imports of certain categories from China was expected to put the European industry at a disadvantage compared with the U.S., where quotas are slated to cease a year later.

Michele Tranconi, president of EURATEX, told an assembly of the organization that an early decision was needed from the European Commission, the executive arm of the European Union, on textile and apparel trade with China in 2008.

Following the global removal of quotas in 2005, imports from China to the EU and the U.S. surged. The U.S. and EU then imposed safeguard quotas allowed under China's 2001 entry agreement into the World Trade Organization. The EU and U.S. then reached bilateral agreements with China setting fresh quotas on certain products through 2007 and 2008, respectively.

William Lakin, EURATEX director general, said in an interview: "One possibility is a one-year rollover of the quotas. We don't want to be a prominent target for Chinese producers. We want the EU to say clearly what it intends to do to rectify the situation."

EURATEX, which represents the industry in the 27 EU countries plus Turkey, said in 2006 the sector employed 2.6 million workers, had a turnover of 205 billion euros, or $276.42 billion at current exchange, and exports grew by 8 percent, to 39 billion euros, or $52.59 billion, compared with the year before.

Trade issues related to the end of the quotas will be discussed when EU trade commissioner Peter Mandelson meets with China's Commerce Minister, Bo Xilai, in Brussels on June 12, EU officials said.

Retail industry sources and senior EU officials have indicated that an extension of quotas was not likely.

Stuart Newman, adviser with the Foreign Trade Association, based in Brussels, an umbrella group for European retailers and importers, said, "Orders are already being placed for next year when there will be no quotas."

A spokesman for Mandelson said the EC had made it clear it intended to set up "a very decent monitoring mechanism to see if there's a disruption in trade" through a surge in import shipments.Also last week, a World Bank report said the removal of quotas on Chinese shipments of textiles and apparel to the U.S. and EU was expected to dampen export volumes and prices in 2008 and 2009 for developing countries with strong specialization in these sectors.

Many of these countries have managed to succeed "surprisingly well" since the quota regime, said the Global Development Finance report. World Bank analysts stress these countries can survive this new pressure if they continue to push ahead with efficiency improvements that have enabled them to perform well in the new global environment.

However, a trade ambassador from one such developing country said, "Any lifting of restrictions on a very competitive country, like China, will definitely dampen both export volumes and prices for textiles and apparel."

Michael Finger, senior economist at the WTO, said the restraints had "pushed" China to look for other markets in terms of exports, such as information technology products and auto parts.

China's global exports of apparel increased in 2005 by 19.9 percent, to $74.2 billion, and last year by 28.6 percent, to $95.3 billion, according to WTO data. Shipments of apparel to the U.S. last year expanded by only 18.8 percent, a substantial deceleration compared with the increase of 77.6 percent posted the year before. Similarly, China's export shipments of apparel to the EU rose in 2006 by 22.1 percent, a marked slowdown compared with the increase of 64.2 percent registered in 2005.

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