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China backs away from concessions

China yesterday scrapped concessions meant to avert a trade war with the US and Europe, responding to new US and European quotas by cancelling plans to increase export tariffs on Chinese textiles that are flooding their markets.

Chinese Commerce Minister Bo Xilai (薄熙來) criticized US and EU textile quotas as a violation of WTO rules.

He said that Beijing would "firmly protect" its legal rights, though he didn't say what steps his government would take.

Beijing last week announced it would quintuple export tariffs on 74 types of goods on June 1, trying to persuade its trading partners not to restrict textile imports that have soared since a global quota system expired on Jan. 1.

The announcement of plans to scrap the tariffs cited US and European steps to restrict imports of Chinese clothing and textiles.

Chinese producers shouldn't face "double pressure," Bo said at a news conference.

The announcement came as China prepared for a visit this week by US Commerce Secretary Carlos Gutierrez.

Textiles are among a series of disputes that have strained China's relations with the US, the EU and other major trading partners.

China also is under pressure to raise the government-set exchange rate of its currency, the yuan, and stamp out rampant piracy of music, software and other goods.

WTO rules

The US and European decisions on textile quotas cited terms of China's WTO membership agreement that let its trading partners restrict imports that are disrupting their markets.

Bo, however, accused Washington and the EU of violating WTO rules by failing to provide adequate evidence of market disruption.

He said that they used data from too short a period and made an "easy decision" to impose quotas.

"In our opinion, this move lacks legal grounding and therefore is incorrect," Bo said at a news conference. "The United States and European Union have not provided adequate data. ... That is unreasonable and unscientific."

The US says imports of Chinese clothing and other textile goods are 54 percent above last year's level.

The EU says imports of Chinese-made T-shirts rose by 187 percent in the first four months of this year, while flax yarn imports rose by 56 percent.

Restrictions

The EU took the dispute to the WTO on Friday, giving China 15 days to react. It means the EU will be allowed to restrict the growth of imports of flax yarn and T-shirts to an annual rate of 7.5 percent.

Washington earlier imposed controls restricting growth of imports of Chinese-made cotton pants, underwear, synthetic fiber shirts and other goods to an annual rate of 7.5 percent.

Already on Friday, the Chinese government reacted to US import quotas by saying the new export tariffs wouldn't apply to goods already affected by foreign controls.

Bo complained that the foreign quotas were damaging a Chinese industry that employs 19 million workers, many of them poor.

Bo said the US and EU were partly to blame for the jump in Chinese textile imports because they failed to carry out earlier promises to lower market barriers ahead of the January lifting of the quota system.

"The fundamental, true reason for this is that the United States and the European Union could not faithfully and honestly implement their obligations," he said.

Bo said despite the rancor over textiles, China wanted healthy trade relations with Washington.

"There are areas where we can seek mutual benefit," he said. "So we are quite optimistic about the future of this bilateral trade relationship."
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