EU, WTO Squabble Over Safeguards

EU trade officials vowed to push forward in their review of whether to impose limits on China after the WTO chief said they should wait a year.

GENEVA — The war of words over the use of safeguard quotas to restrain Chinese exports flared Monday, with European Union trade officials vowing to push forward with their review of whether to impose limits on China.

The EU on Sunday said it would begin a review of imports of Chinese textiles and apparel, which have surged since the nations of the World Trade Organization dropped their quotas on those products on Jan. 1. The U.S. has already initiated a review of Chinese apparel imports.

The moves prompted WTO director-general Supachai Panitchpakdi to call on major importers to wait at least a year before placing quotas on Chinese goods. He was quoted in an article in Monday’s Wall Street Journal that governments should “be a bit more judicious in looking at the figures” on Chinese imports before restraining them.

EU officials on Monday blasted back, with a spokeswoman for EU Trade Commissioner Peter Mandelson pointing out that WTO protocol “allows us to take measures within the special safeguard clause and time frame,” adding, “We have this possibility, which is legal and which China also signed.”

The safeguard provision allows importing nations to place one-year quotas on Chinese exports in categories where their growth causes disruption to the importing market. The safeguards can be renewed through 2008. China agreed to the mechanism when it joined the WTO in 2001.

In the nine categories the EU has begun reviewing, Chinese shipments had increases ranging from 51 to 534 percent during the first quarter. Trade experts have warned that China’s surge is coming at the expense of small developing nations in Southeast Asia, many of which rely on apparel exports as a key source of foreign commerce.

Francesco Marchi, director of economic affairs with the European Apparel and Textile Organization, said without action as many as 500,000 of the EU’s 2.4 million textile and apparel jobs could be at risk. Marchi said, “If we wait too long, countries will have to solve the social problems, which are not part of the WTO.”

He suggested that Supachai’s comments were primarily an effort to prevent the current round of global trade talks “from being derailed.” He said, “If textiles becomes a problem, everything in the negotiations would be blocked.”

This story first appeared in the April 26, 2005 issue of WWD.  Subscribe Today.

A spokesman for the U.S. Trade Representative had no comment on Supachai’s call for restraint. China’s Ministry of Commerce said in a statement that the nation would “resolutely oppose” any effort to restrain its exports, according to press reports.

Munir Ahmad, executive director of the International Textiles and Clothing Bureau, a group with members from 24 developing nations that includes China, called Supachai’s words “absolutely right.”

He noted that during the 10 years leading up to Jan. 1, his group lobbied importing nations to phase out quotas more gradually, rather than waiting until the last minute to drop most of their protections. That approach, he suggested, would have been less disruptive to the importing economies over the long term.