Mandelson warns EU is ready to curb Chinese textile imports

Europe's Trade Commissioner, Peter Mandelson, yesterday paved the way for drastic curbs on cheap Chinese textiles flooding into the EU, as he released figures showing a surge of as much as 534 per cent in Bejing's exports.

Europe's Trade Commissioner, Peter Mandelson, yesterday paved the way for drastic curbs on cheap Chinese textiles flooding into the EU, as he released figures showing a surge of as much as 534 per cent in Bejing's exports.

In a move that could herald a serious rift with China over trade, Mr Mandelson outlined plans for a formal investigation into the "dramatic" increase in the export of textiles and clothing.

Statistics gleaned from EU capitals "give cause for serious concern" he said, adding that the EU should be able to "extend protection to European industry if it is faced with a ruinous surge of unprecedented proportion".

A decision to launch the inquiry, which is due to be rubber-stamped today, means temporary controls are almost inevitable - unless Bejing limits its exports voluntarily. The Commission is drawing up plans to curb the growth in textiles imports into the EU at 7.5 per cent a year, or 6 per cent for wool products.

Mr Mandelson has been under pressure to act from the governments of France, Spain, Italy and Portugal which are anxious to protect their industries.

European textile makers claim the jump in imports is costing tens of thousands of jobs, and that they cannot compete with China's artificially favourable exchange rate, the low labour costs of its non-unionised workforce, its state subsidies to industry and lax copyright regime.

However, the issue has been a key test of Mr Mandelson's commitment to free trade, and economic liberals, including the Swedish trade minister, have called on him not to impose restrictions.

The debate is complex because an unknown proportion of the export surge has come from European companies outsourcing work to China. EU retailers and consumers have also benefited from cheaper clothing as prices have plunged.

Though Mr Mandelson was initially reluctant to act, the scale of the export rises recorded in nine categories has forced his hand. The increases compared with 2004 range from 51 per cent for flax or ramie yarn to 63 per cent for bras, 164 per cent for T-shirts, 413 per cent for men's trousers and 534 per cent for pullovers. These compared with Europe's guidelines for permissible annual increases for these categories of between 30 and 100 per cent.

The surge follows the liberalisation of global trade in textiles that took effect in January this year. Under the deal struck in 2001 over China's accession to the World Trade Organisation, Bejing agreed to a clause allowing short-term safeguard measures until the end of 2008.

An investigation by the European Commission, taking no more than 60 days, will have to be completed before formal talks with China. If negotiation fails, the EU will be able to press ahead with its curbs.

Mr Mandelson admitted that "this safeguard clause is a unique provision and therefore we are in uncharted territory".