China Hits Out at New US Textile Quota

China responded angrily at the weekend to the re-imposition by the US of import quotas on some textile items in an escalation of their trade dispute.

Beijing accused Washington of setting a precedent that would "severely jeopardise the multi-lateral trade system" and issued a veiled threat to take retaliatory action.

Washington's announcement of new quotas for Chinese exports to the US of cotton trousers, cotton knit shirts and underwear will increase the pressure on Europe to take similar measures. Brussels officials have repeatedly warned about the knock-on effect of US curbs, which would be likely to divert more Chinese exports to Europe.

The measures, announced in Washington on Friday, follow investigations launched by the US last month under provisions that allow new "safeguard" quotas to be imposed when there is a surge of imports.

Chong Quan, of China's commerce ministry, said the decision breached the WTO agreement on textiles and apparel and "the basic spirit of free trade upheld by the WTO".

He said: "It has badly damaged the interests of Chinese enterprises and also the confidence of Chinese companies and public in the international trade environment following China's entry into the WTO." China reserved the option to take action in response. Carlos Gutierrez, US commerce secretary, defended the decision at the end of last week, saying the measure "demonstrates the administration's commitment to leveling the playing field for US industry by enforcing our trade agreement".

Preliminary US figures showed a 1,505 per cent increase in imports of cotton trousers from China in the first four months of 2005 and a 1,346 per cent rise in imports of cotton shirts.

US textile makers mainly blame the influx of Chinese goods for the loss of 16,600 jobs in the US industry this year. Chinese imports of textiles into the US and Europe have increased dramatically for some apparel lines since the abolition last year of a decades-old restrictive quota system. The US quotas will take effect when Washington calls for formal talks with China on the issue, which may come as early as the end of this month.

In talks with EU commissioners in Beijing last week, Wen Jiabao, China's premier, said his government was considering introducing measures to restrain textiles exports in response to European complaints.

The European Commission would not comment yesterday. But it is expected to decide soon whether to endorse a request from a group of countries led by France and Italy to impose emergency measures rather than continue its investigation into Chinese imports. This would probably delay any sanctions until September.

These European countries claim booming Chinese imports have done irretrievable damage to their fragile textile sector.