Vol. 5 Num 351 Wed. May 25, 2005  

China threatens to renege on tariff promise

China Tuesday threatened to renege on a promise to impose tariffs on 74 categories of textile products if the same items were subject to limits from US and European governments.

"If the United States and the European Union formally carry out restrictions on any of these categories, we will not impose tariffs on the items in question," a commerce ministry official told AFP.

China on Friday made a conciliatory gesture to the United States and European Union to ease simmering trade tensions, announcing it would raise export tariffs on 74 categories of textile products from June 1.

The ministry of finance said that the 74 categories were among 148 products on which tariffs had already been placed at the end of the decades-long global textile export quota system on January 1.

It also announced export tariffs on flax yarn. Virtually all the products affected are exported to the United States and EU who have both resorted to safeguard measures to curb what they see as a flood of cheap Chinese goods.

Tough quotas mean the United States could effectively close its borders to more imports of some categories of Chinese textiles in the second half of the year, the state-run China Daily newspaper said Tuesday.

Exports to the United States of cotton-knit tops, one of the items affected by quotas, surged to 11 million units in the first five months of the year, compared with 2.8 million units during all of 2004, the newspaper said.

An increase of this magnitude may not leave much room for more imports for the remainder of 2005, said Fawn Evenson, vice president of the American Apparel and Footwear Association.

"The resulting quotas could be so small that the US could close the border to these items in July of this year," she told the newspaper.

In a sign that despite the Chinese move on the 74 categories, frictions are far from over, the European Union went a step further Monday towards imposing limits on some types of Chinese textiles.

The EU's textile committee approved a proposal by EU Trade Commissioner Peter Mandelson to launch formal talks with China on exports of T-shirts and flax yarn.

Textile producers in the developed and developing world have been struggling with a flood of cheap exports from China since the end of the 31-year-old global textile quota.