China to scrap textile export taxes

Reuters Sunday, May 29, 2005; 11:38 PM

SHANGHAI (Reuters) - China said on Monday it would abolish export tariffs on 78 lines of clothing and textiles, keeping its promise to roll back the taxes if Western countries threw up barriers against its goods.

The European Union on Friday formally requested talks with China over surging shipments of T-shirts and flax yarn, which have fanned fears of widescale bankruptcies and lay-offs in the 25-member bloc.

Under the terms of China's accession to the World Trade Organization in 2001, lodging the request requires China to limit its exports of those products to a level no greater than 7.5 percent above the amount that entered the 25-member EU between March 2004 and February 2005.

Washington imposed similar quotas on Chinese-made trousers, underwear, shirts and other goods in mid-May.

To head off such curbs, China introduced an export tax on 148 products on Jan. 1, the day a decades-old system of quotas on developing countries' exports of textiles expired.

China's exports duly boomed, leading to anger in Washington and some EU countries and prompting Beijing on May 20 to offer another round of tariff increases on 74 products with effect from June 1.

In a statement on its Web site, (www.mof.gov.cn) China's finance ministry said tariffs that had been in effect on 78 items since Jan. 1 would be scrapped on Wednesday, and planned taxes on three of the lines listed on May 20 would be revoked.

"The State Council's tax committee decided to further adjust textile export tariffs from June 1," the statement said.

"This includes the abolition of a planned export tax on linen yarn. In total, 81 items will see export tariffs canceled from June 1."

China had given due warning of its planned action.

"If countries take action to limit textile product exports from China, we will exclude those products from the export tariffs," Commerce Ministry spokesman Chong Quan said on May 21.

The executive Commission, which has responsibility for EU trade policy, said intensive talks would take place starting on Monday at all levels with China over its textile exports.

Under WTO rules, if no agreement is reached within 90 days, the EU is permitted to impose the 7.5 percent "safeguard" until the end of the year. They can be renewed until the end of 2008.

China reacted testily on Sunday to the move by Brussels.

"The decision not only transmitted an erroneous signal of trade protectionism for the textile industry sector of the EU, but also undermined the rights and interests of Chinese enterprises in global textile products trade integration," Chong said in a statement posted on the ministry's Web site.

But he said China was willing to settle the problems through consultations with a "pragmatic attitude." The EU, too, held out hope for a mutually satisfactory deal during the 15-day consultation period.

EU figures show imports of Chinese T-shirts rose 187 percent in the first quarter of 2005, while imports of flax yarn, used to make linen cloth, rose 56 percent.