EU's Bra Wars Rejoined

♠ Posted by Emmanuel in ,, at 6/16/2007 02:19:00 AM
The "bra wars" of 2005 resulted from the expiration of the Multi Fibre Agreement (MFA), a system of quotas for textile exports from the developing to the developed world. Unsurprisingly, the EU was inundated with Chinese garments (yes, including the titular women's undergarments) that had EU clothing makers--particularly those in France, Italy, Portugal, and Spain--crying uncle. The interesting political economy angle here was that those EU countries were aligned against those with large retailing firms such as Germany (think of low-price powerhouses like LIDL and ALDI--which I shop at for I'm not a rich man). A temporary deal was reached by EU trade commissioner Peter Mandelson and Chinese trade minister Bo Xilai as described in this BBC article from 2005. The deal involved the establishment of "safeguard" quotas that were part of the preconditions for China's 2002 entry into the WTO:
The EU and China have signed a deal to end the strife over textile quotas that has left more than 75 million Chinese garments piled up in European ports. Under the deal, half the blocked goods will be released unconditionally. The rest will count against 2006 quotas.

The EU imposed quotas in June to stem a huge surge in Chinese imports, after a worldwide, decades-old textile tariff and quota system ended in January…

European producers fear their business will be wiped out, but retailers say they risk empty racks…

Under the old 30-year-old Multi-Fibre Agreement, nations were set annual clothing export limits. The demise of that arrangement led to a massive increase in Chinese clothing exports to the EU, which reacted by imposing import quotas. But as soon as the quotas were announced, retailers and wholesalers rushed to order supplies from China - using up the limits almost as soon as they were introduced.

France, Italy, Portugal and Spain, all of whom have large domestic textile industries, have been most opposed to any change in the quotas. In contrast, several northern European states, including Germany and Sweden, are backing their retailers' calls for the garments to be let through.

During EU-China trade meetings this week, Mandelson and Bo agreed to let Chinese textile exports resume more or less unimpeded in 2008:

On textiles, the EU and China agreed to liberalise bilateral textile trade in 2008.

"Both sides have agreed to abide by the 2005 Shanghai textiles agreement and implement free textile trade in due time," said the press release.

In June 2005, following the so-called "textile war" between China and the EU, Bo Xilai and Peter Mandelson reached an agreement in Shanghai on resuming quotas on China's textile exports to the EU by 2007.

The press release said the EU and China will continue dialogue and cooperation on textiles so as to maintain the steady and smooth development of bilateral textile trade.

Mandelson told reporters that both sides were able to acknowledge and welcome the successful operation of the 2005 Shanghai textiles agreement.

"We were both cognizant of the-if I can put it in this way-re-entry problems of the return to normal trade and we agreed that we wanted to avoid any destabilisation of the market," he said.

"For our part our automatic licencing system will continue through 2008 so we can continue to monitor market developments and discuss jointly with Chinese authorities any actions that we need to take to ensure a smooth transition from the textiles agreement to normal trading," he added.

However, not all are happy about this outcome. Turkey, the second largest exporter of textiles to the EU, fears that its textile exports to the EU will be further affected by inexpensive, high-quality Chinese exports come 2008. Unsurprisingly, Turkey wants to move up the textile innovation ladder to avoid the Chinese steamroller. For Turkey's sake, I hope they can stay in the game:

In the face of China's textile boom and quotas on its trade expiring in 2008, players from the textile industry's private sector as well as government and other sector representatives of Euro-Mediterranean countries and Turkey gathered in Istanbul yesterday to discuss how they could collaborate in order to remain competitive.

B├╝lent Uygun, secretary general of the Denizli Chamber of Industry, said that the EU and participants at the meeting were trying to save the region's industry as it is in danger in the face of China's textile production and export capabilities. Quotas on China will expire in 2008. He explained that the solution lays in the creation of high value-added products such as technical textiles, geotextiles (establishment of which is in progress) and textiles that make use of nanotechnology. There's no future in conventional textiles for Europe and Turkey. We shouldn't insist on producing conventional products, he said. We are trying to manufacture technological textiles but we are slow.

Turkey is by far the largest textile and clothing producer in the Mediterranean region. It provides a broad domestic raw material basis. The EU estimates that 2.5 million workers are employed in the textile and clothing sector in Turkey. That is five times more than what official statistics say. The EU's major supplier of textile and clothing products is China followed by Turkey and India.