EU States Break Chinese Clothes Deadlock

Delegations from the 25 EU governments reached agreement here two days after EU trade commissioner Peter Mandelson had struck a trade deal to resolve an embarrassing standoff which has seriously strained ties with Beijing.

"We would hope that if everything goes smoothly .. that by the middle of next week the goods that are currently blocked in customs can be unblocked," said a spokesman for the European Commission.

Millions of Chinese textiles, including pullovers, trousers, blouses, T-shirts, bras and tons of flax yarn, have been impounded at European ports because they exceed import quotas agreed by both sides in June.

The political agreement, reached by ambassadors from EU member states on Wednesday, opened the way for experts to work on a legal document that will allow the blocked clothes to be released by customs.

Mandelson praised the move. "I am very pleased that member states have approved the agreement with China and the Commission's proposal for unblocking textile imports from China," he said in a statement from India, where he was taking part in an EU-India summit. "This solidarity now allows the Commission to put in place the legal instrument which should allow the member states to begin unblocking goods next week," he added.

Dispute strains ties between EU, China

As well as straining relations between the EU and China, the dispute had led to warnings that a shortage of the goods could cause prices to rise and hit European importers and retailers.

The question of how to deal with the logjam divided EU members, roughly between southern European countries whose manufacturers fear the flood of cheap imports and northern countries where retailers want fresh stocks. About five EU states, including Italy, Spain and Portugal, have balked at allowing the products into the bloc.

Under the deal negotiated in Beijing between Mandelson and Chinese Commerce Minister Bo Xilai, the EU and China will share the quota burden caused by the stockpiles.

About half of the estimated 80 million textile products being held up will enter the EU outside the fixed quotas, while the other half will be added to China's 2006 textile limit.

Lasting solutions needed

Industry officials have welcomed the EU-China deal -- but at least one key official warned that the chaotic scenes of the last month or two could happen again unless the EU commission gets a grip on the problem.

"We are happy with the short term solution," said Foreign Trade Association (FTA) head Ferry den Hoed. But he added: "In the end it still can be chaos next year ... We have large quantities blocked in warehouses in China, and the Chinese are not issuing export licenses any more," he said.

Chinese officials have also warned that the deal remains a short-term fix to a long-term problem and that more lasting solutions were needed.

Some Chinese textile manufacturers have already started worrying about their future exports, according to the state-run Xinhua news agency.

"The export quotas for the second half of the year have almost been used up and if we start using next year's quotas, we will face greater pressure next year," said Zhu Hongjun, a senior manager with Peiluocheng Group in Zhejiang.

In Spain, Finance Minister Pedro Solbes said he believed that the compromise deal did not deal with the crux of the problem. He said that it "does not take into account in a balanced way the whole of the problem".

Leading Spanish textile firms including Inditex, whose flagship store is the retail chain Zara, had earlier said they were "radically" opposed to the proposal.