EU to China: cut textile exports or face curbs

BRUSSELS, Monday (Reuters) - The EU urged China to cut its textile exports or face formal curbs on products such as T-shirts and trousers, which have leapt in some cases by more than 500 percent since the end of a global quota system.

"Europe cannot stand by and simply watch these developments unfold. The time has come to take further action," EU Trade Commissioner Peter Mandelson said, announcing plans for a probe into nine categories of Chinese textile and clothing products.

A global quota regime on textiles wound up on Jan. 1. Mandelson's decision to recommend an investigation to the EU executive Commission could lead to formal curbs on Chinese shipments by the European Union within 150 days.

But EU governments were divided on how to respond to the surge in cheap Chinese imports.

Sweden, Denmark, the Netherlands and Germany cautioned against protectionism, while major textile producers such as France, Portugal and Italy wanted the probe to be faster and expanded to as many as 20 product categories.

Under the terms of its entry into the World Trade Organisation (WTO) in 2001, Beijing agreed that members could cap imports of Chinese clothing and textiles at 7.5 percent above the level of shipments the previous year until 2008 - provided they demonstrate that their own firms are suffering.

China made 17 percent of the world's textiles and clothing in 2003, but the WTO sees its market share rising to above 50 percent within the coming three years.

Mandelson said he wanted an investigation into sharp rises in imports from China of T-shirts, pullovers, men's trousers, blouses, stockings and socks, women's overcoats, brassieres, flax or ramie yarn and woven fabrics. Yet some felt the probe was not enough.

Portuguese Economy Minister Manuel Pinho said a group of around a dozen EU textile-producing nations had identified 20 categories of products to be included in the investigation, which should be completed as soon as possible.

"There is a chance it might take more than nine months, and given the urgency of the situation we should like a fast-track procedure," he said after national trade officials met Mandelson in Luxembourg. Such a probe could take less than three months.

Others say that consumers would win if greater competition from abroad led to cheaper clothes and suggest any move towards curbs would smack of protectionism.

"The textile industry has had 10 years to prepare for the lifting of the quota. We don't see any reason to introduce limits now," said Swedish State Secretary for Trade Lars-Olof Lindgren, urging EU textile firms to be more competitive.