Mandelson looks at Chinese textiles

By Tim Worstall | 26 April 2005

Peter Mandelson, the European Commissioner for Trade, has announced an investigation into surging imports of Chinese textiles. Rises of up to 500% in quantities imported have been seen in the three months since the end of the Multi Fibre Agreement, a series of rules that imposed quotas on such imports. Dependent upon the outcome of the investigation, new limits (i.e. quotas) can be imposed.

There are a number of problems with this move, the most obvious to my mind being that the surge is simply a result of the previous restrictions. If the MFA had not existed, there would have been an adjustment over time rather than this sudden shock. There is also the point that the Commission has seen fit to release the Chinese numbers, but not those for all other countries. So it is yet not clear to what extent there are in fact more textiles coming into the EU or whether we have simply seen a switch from suppliers like Cambodia, Indonesia, Sri Lanka and so on to China, something that the BBC's Panorama warned us about.

While the investigation is in accord with WTO rules, it is so only because a specific provision was entered into China's accesstion treaty:

The Textile Specific Safeguard Clause in China's WTO Accession Protocol (2001) allows WTO members to take temporary safeguard measures to protect domestic textile producers from a sudden surge in Chinese textile exports following the liberalisation of the global trade in textiles on 1 January 2005. This clause allows for short-term protective measures until the end of 2008.

Such rules are there because a sudden burst of free trade can indeed cause problems, as domestic producers struggle to adapt. However, I hope I'm not being too cynical if I suggest that there is less economics and more politics about this investigation than there should be. For the producers have had several years to get used to the idea, several years to prepare. Will protecting them for another three years actually help at all?

As always in such matters of trade, the benefits are widely dispersed, all 450 million of us getting some small amount of value from these cheaper clothes. As the BBC points out the costs are more concentrated:

Mr Mandelson's comments came after the French industry minister Patrick Devedjian said some 7,000 French textile jobs could be at risk unless China limited its exports.

"The situation is very serious... for our businesses which make these products, which have already been suffering for a number of years," said Mr Devedjian.