China and the European Union reached a deal early on Saturday to solve the dispute over an alleged surge of Chinese textile exports.

After about ten hours of closed-door discussions, Chinese Commerce Minister Bo Xilai and EU Trade Commissioner Peter Mandelson hammered out an agreement to limit the rise in Chinese exports of textile and clothing to the EU in the coming three years, staging a smooth transition before completely opening the EU market to Chinese textile exports in 2008.

The hard-won agreement, based on sincerity and mutual benefits and proceeding from the long-term perspective, will allow a reasonable growth for Chinese exports while "giving respite and a much-needed breathing space" for European industry.

It has set a new paradigm for settling similar differences in bilateral trade and sent a clear message to the world that dialogue, in lieu of quotas, is the ultimate way towards a satisfactory, win-win solution.

The agreement will hopefully become a major breakthrough in solving the pending textile trade dispute with the United States, which last month 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.

China has expressed on various occasions its readiness to find a win-win solution to the trade disputes with the United States and the European Union, and has taken voluntary actions to curb soaring textile exports after the global quota system ended at the start of this year.

On Jan. 1 this year, China began to impose export tariffs between two and four percent on 148 categories of textile and clothing products including coats and skirts.

Its efforts have started to pay off and latest Chinese customs statistics say China's apparel exports in the first four months of the year increased 15.6 percent over the same period of 2004 to 19.

27 billion US dollars, while the country's overall foreign trade growth for the four-month period was 34 percent year-on-year.

Amid escalation of trade tensions with the United States and the European Union, China last month announced significant export tariff increases on 74 lines of textile and clothing products, but scrapped them again to avoid posing "double pressure" on domestic manufacturers when the United States and the European Union failed to respond positively to its voluntary move.

The European Union, on its part, upholds the principles of free trade. It urged emergency consultation with China while conducting the safeguard investigation and sent a delegation of EU "troika" foreign ministers to China for discussions on textile trade among a wide range of other issues to show its sincerity to seek long-term trade development with China.

"The Chinese government appreciates the EU's sincerity in solving trade disputes with China through dialogue and consultation, instead of taking unilateral actions," said Chinese Commerce Minister Bo Xilai.

EU's move is in sharp contrast with the US slapping of import limits, an approach that is widely criticized by the international community as discriminatory and protectionist, undercutting the very principles it is promoting.

The US quotas on seven categories of Chinese-made textiles will likely incur 2 billion US dollars of losses to the Chinese industry and affect up to 400,000 workers, according to China Textile Import and Export Chamber.

More importantly, the restrictions will eventually backlash to hurt the Americans: ordinary consumers will have to spend 20 percent more on clothing; importers will shift to other low-cost foreign suppliers and retailers will probably have less clothing categories to choose from -- and at higher costs, too.

A Morgan Stanley survey says inexpensive Chinese-made children's wear has helped American parents save at least 400 million US dollars between 1998 and 2003.

It is widely believed among the Americans that curbing imports from China does little to help the ailing textile industry of the United States, which has been at a competitive disadvantage even before China became a full member of the World Trade Organization in 2001.

Nor will it help other developing countries much because the law of nature in the global trading system is for textile and other labor-intensive industries to be transferred to countries like China that enjoy rich resources and low costs.

In today's world of economic globalization, it would be unwise to let the textile trade issue hinder the all-round development of trade relations because after all, textile trade makes up only a small percentage in China's total trade with the United States and the European Union.

Source: Xinhua