China is the biggest producer of textiles worldwide. The goods which are made there are characterized by very low price and their quality is improving systematically. Thus, it is not a big surprise that many European companies are interested in importing clothes and textiles from China. Regulations concerning import of these goods to the European Union countries will change with the beginning of a new year. We decided that it is an important issue which is worth introducing to our users.

On the 1st January 2008 quantitative rations concerning import of ten categories of textiles to EU will expire. They were introduced on the 11th June 2005 by the European Commission on behalf of all the member countries, in order to protect the EU market from deluge of clothes and textiles from China. It was a direct consequence of the fact that in the beginning of 2005 the full liberalization of textiles trade took place.

It turned out quickly that the import to the European Union was rapidly growing. European federation of textile industry EURATEX appealed to the European Commission to introduce protective clauses in 12 categories of products. At the beginning of April France officially complaint but the Commission initially didn’t reacted actively. It was the statistic data that persuaded Trade Commissar, Peter Mandelson, that there should be an investigation into 9 categories of textiles (7 mentioned by EURATEX, 2 added by the Commission) whose import is particularly intensified and extended alarm states. The growth of the import depended on a category, fluctuating from 54% to 534%. The Commission started the investigation immediately, whose aim was to check whether there occurred a disturbance on the community market and what steps should have been undertaken in order to protect it. Discussions with the Chinese started. The Commission appealed to China for self-limitation of the export.

The Prime Minister of the People’s Republic of China, Wen Jibao, reluctantly announced some restrictions of export. However, under the influence of a strong lobby of the EU members and EURATEX, the Commissar Mandelson announced the beginning of official negotiations with China as part of the WTO. The talks were concerning two categories of products: T-shirts and linen. Thanks to the focus on two categories only, the potential restrictions would be introduced much quicker.

The European Commission used another argument, namely it claimed that China pull out of the EU markets weaker exporters, such as Pakistan, Indonesia, Thailand, South Korea, Philippines, Mauritius, Morocco, Bangladesh. The Chinese proposed a compromise: 400% increase of export fees on 74 types of textiles. However, the EU countries realized that such increase only meant a several dozens USD cents rise. Thus, the proposal was refused. China reacted brusquely and accused the European Union of  breaking the WTO rules. They even announced making a complaint to the WTO. However, pragmatism was the decisive factor. The European Union is China’s second business partner, right after USA.

In June 2005 in Shanghai, Peter Mandelson and the then trade minister of the People’s Republic of China, Bo Xilai’a, signed an agreement. It included annual limits of the rise of import in 10 out of 35 liberalized categories.

In 2005 the limit of rise was to be 8% for three categories: sweaters, men trousers, blouses; 10% for: T-shirts, dresses, bras, linens; 12.5% for: cotton, bedding, tablecloths and towels. What it exactly meant can be depicted on the example of bedding: in 2005  export of bedding was 14040 tons. According to the arranged standard of increase – 12.5%, export in 2006 was expected to be 15759 tons and in 2007 17770 tons. In order to import products belonging to 10 mentioned categories, one had to obtain an import license. They were issued after earlier presentation of the export license of the Chinese (issued by the officials of the People’s Republic of China) and verification of previously set limits.

It turned out quickly that the agreement protects only European producers and the importers are to put at risk of making considerable losses. Many companies wanted to undertake legal proceedings against the European Commission. The main cause of the situation was the wrong composition of agreement. It was signed on the 10th of June and was come into life on the 12th of July. In addition, new export permissions were issued by the Chinese not until the 20th of July. In the allegedly short period between June 10th and July 20th many importers placed huge orders. When the textiles started to reach Europe, the established limits were quickly exceeded. The containers with the excess were stopped in the ports and were not allowed to enter Europe. The importers and companies which commissioned all their production to the Chinese were forced to search for exporters in other countries, such as India, Bangladesh or Turkey. It was estimated that signing of such restrictive terms of the import of textiles from China would put European trade at risk of making 800 million Euro loss. When it turned out at the end of August that 85 million pieces of Chinese textiles are held up in ports, the European Commission decided to start negotiations with China.

Three solutions were considered. First, to let all the stock into Europe. The notion, however, caused harsh opposition of the southern European countries. Second, to let all the stock into Europe but keeping import limits established for 2006. However, the Chinese were against the idea. Third, to move the goods in accordance with the limits for 2005, which was possible because the cotton limits were not exceeded. However, the Chinese were aware of the difficult situation for the European Union, thus they negotiated hard. Moreover, the Prime Minister of Great Britain, Tony Blair, appealed for a quick solution of the problem, as he wanted to have it done before the EU summit on the 6th of September 2005.

The agreement was signed on September the 5th. It was agreed that a half of the 85 million pieces of textiles would be allowed on the EU markets beyond the limits, 25% would be allowed in accordance with 2006 limits and the latter 25% would be moved in between product’s categories. On the strength of the agreement, some measures which were to prevent similar problems in the future. Moreover, a new margin of security was introduced in the annual limits, a special reserve in the category of cotton textiles was prepared. Some more flexibility was also applied for the movement of the goods between the limits for particular years and categories. Finally, the system of issuing import licenses was improved.

The agreement of June 2005 was to expire on the 31st December 2007. The European Commission and the EU countries agreed that it still necessary to monitor the import of textiles from China. Thus, on the 9th October 2007 it was decided that from the 1st January 2008 there will be double-checking system for 8 categories of textiles: t-shirts, pullovers, men trousers, blouses, pyjamas, dresses, bras, linen. Giving up rations is a step towards liberalization of trade of textiles between the European Union and China. Simultaneously, the possibility of strict monitoring of eight categories of textiles was maintained. Thanks to it, the European Commission will have the opportunity of quick reaction if the transfer of goods causes loss among other producers. It should prevent from the situation of 2005.

Double-checking system means that ones should first get the copy of the export license of the Chinese contractor. On the basis of it one can apply for the permission to import the goods. Such a document can be issued by any of the EU members.

Maciej Pletnia