EU and the Chinese Textile Quotas
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Code : ITF0023
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Region : :Europe |
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Introduction: The MultiFibre Agreement (MFA), introduced in 1974, established quotas to limit the amount of textile exports to countries whose domestic industries were facing serious crisis from rapidly increasing imports. TheMFAhad restricted China’s massive textile industry from making exports to the EU. But with the MFAcoming to an end in 2005, China took advantage of its capability ofmanufacturing low-cost garments and soon theChinese textile exports to the EU witnessed a tremendous increase. As the low-costChinese goods continued to flood the Europeanmarket, an agreement was signed between the EU and China in June 2005, which temporarily restricted the export growth rate in 10 categories of textiles. The agreement was welcomed by some of the Southern European states like France, Spain and Italy, as these states were home formost of the European textilemanufacturing industries. Prior to the agreement the European industries faced competition from the low-cost Chinese goods, and this ultimately resulted in job losses and closing down of some of the industries. But the agreement helped to protect the domestic industries by restricting the Chinese imports. However, the Northern European countries such as,Germany, Denmark and Sweden opposed the agreement. These countries held big retail garment stores and the stores were benefited by receiving low-cost Chinese apparels. As the retailers had not anticipated any such agreement, they had placed huge orders with the Chinese manufacturers and within a couple of months after the agreementwas signed, the imports exceeded the agreed levels. The EuropeanCommission did not allow the exceeded level of goods to enter the European boundaries and by the end of August 2005,more than 75million textiles were stuck at the European ports. The governments of theNorthern European countries forced the EuropeanCommission to make amendments in the agreement, while the Southern countries voted for the agreement to continue. Finally, in September the EU and China made amendments in the previous agreement, as they changed the growth levels of the imports fromChina.However some of the retailers and theChinesemanufacturers feel that thiswas a temporary agreement and theministers of both, EU and China need to come up with a permanent solution to maintain sound, long-term trade relations between the two. “If the re-imposed quota systemis reallymeant to ensure a smooth end for protectionistmeasures three years on, the EUshould start towarn local textile producers that protectionwill not be provided for much longer”, said the state-controlled China Daily newspaper. |
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