Leading article: The EU-China dispute is not just about cheap clothes

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The Independent Online

This is, of course, a highly unsatisfactory situation from almost any point of view. Chinese factories, many built or partly financed with Western investment, face losses and may have to lay off workers. European retailers are without new stock that they ordered many months ago and are scrambling to find replacement suppliers. European shoppers face higher prices, and governments - the British Government, at least - risk embarrassment if higher clothing prices fuel inflation.

At one level, blame is not hard to apportion. China's entry into the World Trade Organisation and the expiry of 10-year quotas on Chinese textile exports at the start of this year precipitated a sharp increase in imports of Chinese-made clothing into the EU. Italian and other EU manufacturers had ample time to adjust, but did not. The fault is partly their own. When they campaigned for new quotas - in the run-up to national votes on the European constitution - the EU obliged and negotiated new quotas. But the timetable gave importers too little time to adjust. Within two months, most of the new quotas had been met; deliveries were halted.

Now, EU negotiators are heading to China to try to find a solution, which could entail an agreement to issue licences against next year's quotas. This would fend off the immediate problem and give all parties more time. What it will not do, though, is solve the bigger problem of the huge disparity in manufacturing costs between China and Europe. This will surprise no one (except perhaps Italian clothing producers). The United States, which - as so often - has trodden the same path before us, now imports a large proportion of clothes, toys and smaller electrical goods from China. This has kept US consumer prices low and reined in inflation, but it has also made many US manufacturing sectors unviable.

And it has encouraged the view, accepted also by our own Labour government, that there can be no bucking the trend towards globalisation, that industrialised countries must embrace the so-called "knowledge economy", and that many types of manufacturing are most rationally left to cheap-labour economies elsewhere. The consensus is that, to be competitive, the advanced economies must concentrate on style and design, high technology and high quality.

In the short term, this argument looks unimpeachable. But it raises questions for the longer term that are harder to answer. It is comparatively easy for Britain to sing the joys of globalisation, given its pre-eminence as a world financial centre. France and Germany have retained a significant manufacturing capacity for goods which compete on quality and style in sectors where there is relatively little low-price competition - but this may not last. And one way in which the US stays competitive is in its plethora of low-paid jobs. But would US-style wage disparity be acceptable in Britain, let alone elsewhere in Europe? And what might be the global effect of a rise in Chinese and Indian wages?

Ending the many-layered dispute over imports of Chinese textiles may put pullovers into our shops in time for Christmas, but it will not, and should not, end the wider discussion.

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