The Hindu : Business : EU keen on early solution to textile tangle with China

Online edition of India's National Newspaper
Friday, Aug 26, 2005

Business

Business

EU keen on early solution to textile tangle with China

Batuk Gathani

Importers struggle to meet financial obligations

LONDON: The European Union officials are busy setting up "urgent'' meetings with Chinese officials, both in Brussels and China to "sort out the mess on Chinese textile quota system.'' Both sides are keen to reach an "amicable and long term'' solution since China has emerged as the EU's second largest two-way trading partner after the U.S. Peter Mandelson, the EU's Trade Commissioner, admitted to a "serious glitch'' in EU's implementation of the Chinese textile quota system which has now triggered an embarrassing spectre of some 75 million Chinese garments languishing in North European bonded warehouses. Apart from the warehouse rent, the European importers have negotiated advances from commercial banks and it remains to be seen how they will manage to "liquidate'' heavy inventory to meet their financial obligations.

Mountains of Chinese jumpers, T-shirts, blouses have been piling up in port warehouses and ships since the EU re-imposed import quota system on ten textile categories. Mr. Mandelson insisted that the recent agreement among the 25 EU member states was re-imposed on July 12 for 30 months and every one has gone in it "with their eyes open.'' The textile quota was technically abolished on January 1 and re-imposition of the quota system prompted European importers to place urgent orders with Chinese suppliers to "dodge the quota system.'' Obviously this had backfired and the European market is now glutted with 75 million `extra garments.'

Proposition rejected

According to the EU officials, China has rejected proposition of using 9 per cent of next year's quota to let blocked goods enter the EU markets. Chinese officials insist that nine per cent would free only a portion of blocked Chinese goods. The European importers are concerned about the "blocked'' merchandise losing not only its value but also design appeal. This is a highly seasonal fashion trade and yesterday's inventory cannot be sold easily sold today.

The Europeans are trying to locate and identify "alternative'' sources of supply. If the "blocked'' inventory is not released in the immediate future, it can become obsolete fashion wise. The Christmas season is only three months away and rated as "prime selling'' season for importers and distributors at the wholesale and retail levels. China was seen entering "global economy'' when Mr. Mandelson negotiated the first textile import deal with China, but that "global economy'' is based on free trade and not quotas.

France, Spain and Italy have consistently lobbied EU officials in Brussels to adopt the textile quota as a way to protect the European textile industry, since the hardcore of the European textile industry is based in southern Europe. The North European Scandinavian countries are vehemently opposed to the quota system. The current episode also highlights the fact that the European textile and garment industries and trade are overwhelmingly dependent on China.

Printer friendly page
Send this article to Friends by E-Mail

Business