China attacks U.S., EU trade limits

[HenryTo]

Latest from CNN.com. Looks like things are now heating up pretty quickly between China, the U.S., and Europe. More calls for reevaluation are in the cards, IMHO.
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China attacks U.S., EU trade limits

China removes its tariffs on textile exports to U.S., EU, says it may use WTO to challenge limits.
May 30, 2005: 8:21 AM EDT

BEIJING (Reuters) - China hit out on Monday at the United States and the European Union for curbing Chinese textile exports, saying the restrictions were justified neither by trade law nor by statistics.

Commerce Minister Bo Xilai said Washington and Brussels had failed to prove their domestic markets had been disrupted by an increase in Chinese exports since a 40-year-old system of quotas on developing countries' exports of textiles expired on Jan 1.

Bo said China was willing to hold talks, but he was scathing about the "double standards" of rich countries that flew the flag of free trade but rushed to throw up barriers when poor nations started to exploit their comparative advantage of cheap labor.

"The EU and the United States should spend more time on the development of high technology -- Airbus or Boeing airplanes, and advanced modern machinery -- rather than spending time quarrelling with us on issues like shirts, socks and trousers," he said.

Bo was speaking hours after China said it would scrap export tariffs on 81 textile products, making good on its threat to roll back the taxes if the West imposed curbs on its goods.

The tit-for-tat move followed a formal request on Friday by the European Union for talks with China over surging shipments of T-shirts and flax yarn, which have fanned fears of wide scale bankruptcies and layoffs in the 25-member bloc.

China now has 15 days to limit this year's increase in exports of the two products to 7.5 percent over 2004 levels, otherwise the EU will enforce the limits itself.

Washington imposed similar quotas on Chinese-made trousers, underwear, shirts and other goods in mid-May.

Bo said the measures violated World Trade Organization rules and discriminated against China. He also disputed the evidence marshaled by the two governments to justify the curbs.

"The EU and U.S. imposed quotas on Chinese textiles based on primary data obtained in a short period of just three or four months and made a cursory decision. They are groundless and unscientific," Bo said. "In our opinion this move lacks legal grounding and therefore is incorrect."

Immediate Risk
The EU immediately rejected Beijing's charge.

"We have shown that not only is there a surge in imports from China but also ... that there is an immediate risk for (European) companies," European Commission spokeswoman Claude Veron-Reville said in Brussels.

In Europe, the flood of Chinese imports has crystallized fears that the EU is failing to protect jobs and was a background factor in French voters' rejection on Sunday of a new EU constitution.

But Bo said textiles were more important to China, where 19 million people depended on the industry for their living. Exports of $2.3 billion were at risk due to the U.S. and EU curbs.

Against this background, he said China had no choice but to scale back the export taxes it had voluntarily introduced.

"Since the U.S. and the EU have already decided to take quantitative restrictions against Chinese exports of textiles, how can the Chinese government possibly reimpose export duties on those products?" he asked.

EU figures show imports of Chinese T-shirts rose 187 percent in the first quarter of 2005, while imports of flax yarn, used to make linen cloth, rose 56 percent.

Bo said China's analysis of the market differed sharply.

He said that Chinese textile exports in the first four months of 2005 rose 18.4 percent from a year earlier to $31.2 billion.

Not only was this rise 5 percentage points smaller than the increase recorded in the same period of 2004, but it lagged the 35 percent jump in overall Chinese exports for January to April this year.

The row over textiles has added fuel to a debate over the value of the yuan, which has been pegged near 8.3 per dollar for a decade. Law-makers and manufacturers in the United States, as well as many independent economists, believe the peg undervalues the currency, giving China's exporters an unfair advantage.

Bo gave no clues as to Beijing's thinking on a shift in the currency, saying only that when the government decides it will consider China's needs and the stability of the global economy.

[HenryTo]

Still very much an ongoing development. Quote: "On Thursday, WTO Director-General Supachai Panitchpakdi said the dispute was still in an "initial phase" which requires further negotiations among involved parties."
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Friday June 3, 11:24 AM
U.S., Chinese trade officials meet over textile dispute
The top Chinese and U.S. trade officials met Friday to narrow their differences on the latest dispute concerning a flood of Chinese textile exports into the American market.

The meeting between U.S. Trade Representative Robert Portman and China's Commerce Minister Bo Xilai came on the sidelines of a gathering of trade officials from the Asia-Pacific Economic Cooperation forum on South Korea's resort island of Jeju.

The two talked for about 1 1/2 hours, and Portman said afterward that they had "very helpful, constructive discussions on the various trade issues." He was to hold a news conference later Friday.

Concerns of a new trade war rose earlier this week when China scrapped plans to raise tariffs meant to slow the growth of textile exports in response to new import controls imposed by Washington and the European Union.

After the meeting Friday, Bo criticized the new U.S. controls as "not fair at all." "It's a move of protectionism," he said.

On Wednesday, Bo told The Associated Press that surging exports of Chinese-made textiles are "the legitimate right China is entitled to "after it had adequately compensated by opening up its domestic market."

"Every country in the world must respect this very important direction of trade liberalization," Bo said.

However, the United States and the European Union argue their markets are seriously disrupted by the surge in Chinese clothing and textile imports.

Portman is to join U.S. Commerce Secretary Carlos Gutierrez later this week in China, where he will meet China's Vice Premier Wu Yi over the textile dispute.

Beijing had announced last week that it would quintuple export tariffs on 74 types of goods on June 1, trying to persuade its trading partners not to restrict textile imports that have soared since quotas were scrapped at the end of last year.

But Beijing dropped the plans following a U.S. move to impose quotas to restrain the growth of imports of low-priced Chinese textiles. The European Union referred the textile dispute to the World Trade Organization, which triggered similar controls.

On Thursday, WTO Director-General Supachai Panitchpakdi said the dispute was still in an "initial phase" which requires further negotiations among involved parties.

"We would have to let the process take its course at the moment," Supachai told reporters.

[HenryTo]

This is a very important ongoing development that we should continue to monitor. Let's just hope that no one does anything stupid on either side:
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Thursday June 2, 12:07 PM
U.S. commerce secretary arrives in Beijing amid textile dispute

U.S. Commerce Secretary Carlos Gutierrez arrived in Beijing on Thursday for a three-day visit expected to cover ways to ease tensions between the two countries over surging Chinese textile exports.
Gutierrez will meet with Vice Premier Wu Yi and Commerce Minister Bo Xilai during his stay in the Chinese capital, China's official Xinhua News Agency reported.

The visit comes at a time when Chinese textile and clothing exports have increased following the end of a decades-old global quota system Jan. 1.

The United States has imposed emergency import curbs on several textile and clothing products, prompting sharp opposition from Beijing. China has also complained about a similar move by the European Union.

As a tit-for-tat measure, China announced it is scrapping export tariffs on 81 textile products and revoking its earlier decision to raise tax rates on 74 items.

U.S. Trade Representative Rob Portman is expected to join Gutierrez in his meeting with Wu on Saturday, after attending an Asia-Pacific Economic Cooperation forum meeting on South Korea's Cheju Island.

Xinhua reported Chinese analysts expect the visit by Gutierrez and Portman to help ease the textile trade friction between the two countries.

"Though the parties appear to be tough, the trade dispute is far from a trade war," Xinhua quoted Zhang Hanlin, director of the China Institute for World Trade Organization Studies at the University of International Business and Economics in Beijing, as saying.