Brussels, 17 May 2005
EU Trade Commissioner Peter Mandelson is today proposing to the Commission that it launch formal consultations with China for two of the nine categories of textile imports from China currently under investigation: T-shirts and flax yarn. In view of the seriousness of market disruption in these categories, formal consultations need to begin immediately. These consultations will involve urgent discussions between China and the EU on how best to limit growth in Chinese exports in these categories. Under WTO rules, incorporated into China’s accession protocol to the WTO, China is expected to use this period of consultation to propose means to manage the surge in its exports. Only if China does not take effective action will the Commission propose temporary limits on the growth of Chinese exports in the categories concerned in 2005.
On 29 April, the Commission opened investigations of nine categories of Chinese textiles exports to the EU. While these investigations can take up to 60 days, the procedure allows for urgent consultations with China within the WTO to be triggered for any product where import surges and the threat of immediate damage to the Community industry are very high.
The Commission’s investigation has revealed that imports from China in the first months of this year have risen by 187% for T-shirts (category 4) and 56% for flax yarn (category 115), compared with the same period in 2004. Furthermore, the investigation also points to a dramatic deterioration of production, profitability and employment in the Community industry in these categories. For T-shirts produced in Greece, Portugal and Slovenia there has been a production drop of 12%, 30-50% and 8% respectively. For flax yarn, production across Europe has fallen by 25%, turnover by 25% and employment by 13% on the same period in 2004.
This sudden surge of imports is also damaging the textiles sectors of several vulnerable developing countries. In particular exports of T-shirts to the EU from Pakistan, Sri Lanka and Bangladesh have dropped by 37%, 25% and 9% respectively since the beginning of the year.
The consultation procedure requires China to act to remedy the situation by slowing the growth of its exports in these categories to the level of the first twelve of the previous fourteen months, plus 7.5%. These limits would be effective until the end of 2005.
Discussions have been taking place with China to address this problem and are still on-going. Following a first set of measures taken by China at the beginning of 2005 which have so far had no appreciable effect, China last week announced that it would introduce new strong measures which would have effect in one month.
The Commission awaits full details of those measures. The effect of any new measures will be taken into account in the consultation procedure and would influence the Commission’s decision whether or not, in due course, to impose safeguard measures.
Under the conditions set out in China’s 2001 Protocol of Accession to the WTO, special textile-specific safeguard measures can only be taken temporarily until the end of 2008.