China "Unaware" of EU Trade Sanctions

Upping the ante in a looming trade war with China, the European Commission called for "formal consultations" with Beijing Monday and said that if China did not take voluntary action to rein in its booming textile exports, Brussels would "propose temporary limits."

EU Trade Commissioner Peter Mandelson, launching an emergency procedure allowed under World Trade Organization (WTO) rules and called for consultations with Beijing on imports of T-shirts and flax yarn.

The EU will impose "temporary" and "reasonable" limits on imports of the two sectors if China does not take voluntary action to rein in its booming exports by the end of a 90-day period, Mandelson told AFP.

China promises its own measures

Meanwhile, China's commerce ministry said Tuesday it was unaware of plans by the European Union to slap quotas on Chinese textile exports until the end of 2005.

"We have not heard about this," said an official at China's commerce ministry, declining to comment further.

Chinese Premier Wen Jiabao last week promised more measures to curb rampant growth in textile exports to the EU. He said Beijing would "take further effective measures to strengthen our guidance and control on textile enterprises, to adopt economic measures to control the rapid growth of some textile products and clothing exports."

Exports surged 534 percent

The EU's executive commission launched an investigation into select textile and garment categories from China last month after compiling evidence that exports surged by as much as 534 percent after a 31-year-old global quota system ended in January.

Normally, the investigation is supposed to last a maximum of 60 days during which informal consultations are to be held between Brussels and Beijing to try to find a solution. But some EU textile producers have been urging the EU to adopt emergency procedures, which would fast-forward the process to a much more serious formal consultation period.

But so far, the commission has only pushed for talks.

"In view of the seriousness of market disruption in these categories, formal consultations need to begin immediately," said the commission in a statement.

EU threatens interim sanctions

Under WTO rules, incorporated into China's accession protocol to the WTO, China is expected to use this period of consultation to propose means to manage the surge in its exports.

"Only if China does not take effective action will the Commission propose temporary limits on the growth of Chinese exports in the categories concerned in 2005," the statement added.

However, the rules also allow the EU to impose "interim import growth restrictions" during the consultation period if China fails to rein in exports to the EU within the first 15-days after the formal talks begin.

The EU is not the only trade partner of China's to consider action limiting textile exports. The United States re-imposed quotas last week on Chinese-made cotton knit shirts and blouses, cotton trousers, and cotton and man-made fiber underwear, in order to curb a flood of imports.