EU and China strike textile deal

European trade commissioner Peter Mandelson and Chinese minister of trade Bo Xilai have secured a compromise over the month-long EU-China textile row.

After a ten hour negotiation marathon in Shangai on Friday (10 June), the Chinese authorities have pledged to voluntarily limit textile imports growth to Europe by 8-12 percent per year on the ten product categories currently under investigation by the European Commission.

The EU has in return accepted to use "self-restraint" over its right to impose safeguards against Chinese textiles until 2008.

Under the deal, the EU is also expected to drop its case against Chinese t-shirts and flax yarn at the WTO, as well as to stop ongoing investigations into eight other product categories.

"I believe that the overall settlement offers a fair deal for China while giving respite and much needed breathing space to textiles industries in Europe and developing countries", Mr Mandelson said in the aftermath of the talks.

Product categories covered by the agreement are: pullovers, men’s trousers, blouses, t-shirts, dresses, brassieres, flax yarn, cotton fabrics, bed, table and kitchen linen.

The agreement now has to be endorsed by EU member-states in order to come into force.

The deal sends "a clear message to the world that dialogue, in lieu of quotas, is the ultimate way toward a satisfactory, win-win solution", Xinhua news agency said in a commentary, quoted in Reuters.

The Chinese agency points out that the Sino-EU textile agreement will put pressure on the US, which has already slapped quotas on seven Chinese product categories, to follow Europe's example.

According to Xinhua, China's textile exports to the EU were worth €8.9 billion in 2004, or six percent of the total of China-EU trade.

The EU is China’s number one commercial partner while China is the EU’s second largest after the US.

The textile industry, which reportedly employs close to one million people in the EU, employs 19 million people in China and is a vital piece of its export-driven economic locomotive, according to Reuters.