China and the US exchange sharp words on quotas

China warned the US yesterday bilateral trade will be hurt if import quotas are slapped on textile products, as the US Federal Reserve chief cautioned against "creeping protectionism."

US Ambassador Clark Randt was called in by Chinese Vice Minister of Commerce Ma Xiu-hong (馬秀紅) for an emergency meeting Thursday, a day after he was hauled in by Vice Foreign Minister Zhou Wenzhong (周文重), the Xinhua news agency said.

Simmering tensions between the trading giants flared this week when Washington, under pressure to protect US jobs in sensitive industries ahead of a presidential election campaign, said it would cap imports of Chinese bras, knit fabrics and dressing gowns.

Ma told Randt the US decision would negatively impact China-US trade and harm the US' domestic interests.

As the row rumbled on, US Federal Reserve chairman Alan Greenspan called for action to counter "creeping protectionism" in the US and elsewhere that threaten the global economy.

The influential Federal Res-erve chief warned, without specifically naming the disputes, that protectionism was a threat to the international economic recovery fueled by freer global trading.

In a speech at a financial conference in Washington, he said that "the costs of any new such protectionist initiatives, in the context of the wide current account imbalances, could significantly erode the flexibility of the global economy. Consequently, it is imperative that creeping protectionism be thwarted and reversed."

China's Ma said the US decision did not conform to the US Committee for the Implementation of Textile Agreements's procedure on special safeguards against Chinese textile products and garments.

"The US administration's decision to request negotiations regardless of the fact runs against the WTO principles on free trade, transparency and non-discrimination," Ma said.

China has warned it could retaliate but has not been specific, although it said Thursday it was studying plans to impose duties on some US manufacturing products.

The flap comes just weeks before Premier Wen Jiabao (溫家寶) arrives in Washington.

The Financial Times yesterday said he would go equipped with a new, softer philosophy on trade that Beijing hopes may help reduce tensions.

Senior Chinese officials were quoted as saying China is now willing to accept the idea that in future it might run a trade deficit with the rest of the world.

This is effect drops a long-standing imperative to boost exports and accumulate foreign reserves through successive trade surpluses, the newspaper said.