The Hindu : Business : EU in a quandary over Chinese textiles

Online edition of India's National Newspaper
Friday, Apr 08, 2005

Business

Business

EU in a quandary over Chinese textiles

By Batuk Gathani

LONDON, APRIL 7. European officials are in a quandary over China's `fast escalating' textile and garment trade with the European Union countries. American trade and commerce officials are also in a similar predicament. According to the latest data both from Washington and Beijing, China's textile and garment trade has jumped over 50 per cent in recent months compared to last year.

China's trade surplus with the U.S. and the European Union is widening in China's favour at an "embarrassing and perhaps disastrous" pace, according to European Union officials. China accounts for a quarter of current U.S. trade deficit and China has a trade surplus in its favour, of Euro 20 billion plus in the European Union. Hence, European officials are discussing some form of `trade restrictions' to stem the large flood of Chinese textile and apparel imports. On Wednesday, EU Trade Commissioner, Peter Mandelson, however, resisted calls to impose curbs on Chinese textile imports. It is a status quo situation.

Shortage of labour

Chinese officials are trying to play down the significance of all this. However, western trade officials have long predicted that with the end of textile quota system — effective from the beginning of this year — China's efficient and low-cost manufacturing could have a lion's share of global $495 billion textile and apparel trade. This would have a hugh impact not only on the textile and apparel industry in the U.S. and European Union but many other Asian countries - India included - would be drastically affected. There are still less than a million jobs - 665,000 in the U.S. and the rest in the European Union countries - in the textile and apparel industry but with growing profile of China's exports, these could be gradually wiped out. The silver lining , according to western observers, is that China for the first time is experiencing shortage of skilled labour and there is growing wage pressure on China's domestic front. It is argued that this could gradually erode China's current position as the world's dominant low cost producer.

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