China: US and EU sanctions are illegal

Bo told a news conference in Beijing on Monday the sanctions imposed by Washington against seven lines of Chinese textiles, and a move by Brussels that could result in curbs on imports of Chinese T-shirts and flax yarn, violated WTO rules because they were discriminatory.

In the absence of a third party to judge conflicting positions, it might become necessary to turn to the WTO’s trade dispute mechanism (DSM), Bo added.

There were advantages in trying to resolve the dispute through bilateral negotiations, he said.

   

“We will resort to this mechanism when it’s time for us to do so,” he said.

 

He also said: “Whether we will resort to the DSM, and when, is completely up to the Chinese side.”

No justification

Bo emphasised that the move was justified neither by trade law nor by statistics, saying Washington and Brussels had failed to prove their domestic markets had been disrupted by an increase in Chinese exports since a decades-old system of quotas on poor countries’ exports of textiles expired on 1 January.

“The EU and US imposed quotas on Chinese textiles based on primary data obtained in a short period of just three or four months and made a cursory decision. They are groundless and unscientific,” Bo told a news conference.

 

“Whether we will resort to the DSM, and when, is completely up to the Chinese side” Bo Xilai, Minister of Commerce

He was speaking hours after China said it would scrap export tariffs on 81 textile products, making good on its threat to roll back the taxes if Western countries threw up barriers against its goods.

 

The tit-for-tat move followed a formal request on Friday by the European Union for talks with China over surging shipments of T-shirts and flax yarn, which have fanned fears of wide scale bankruptcies and lay-offs in the 25-member bloc.

 

The EU has said it hopes a deal to avoid the imposition of import curbs could be struck during a 15-day consultation period.

Export limitations

However, under the terms of China‘s accession to the World Trade Organisation in 2001, the act of lodging the request already requires China to limit its exports of those products to the EU to a level no greater than 7.5% higher than between March 2004 and February 2005.

 

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

 

Bo said China‘s analysis of the market differed sharply from that of Washington and Brussels.

 

He said that Chinese textile exports in the first four months of 2005 had been 18.4% higher than a year earlier at $31.2 billion.

 

Not only was this rise 5 percentage points smaller than the increase recorded in the same period of 2004, but it lagged the 35% jump in overall Chinese exports for January to April this year.

Legality

 

“In our opinion this move lacks legal grounding and therefore is incorrect,” he said.

 

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

 

The EU immediately rejected Beijing‘s charge.

“We have shown that not only is there a surge in imports from China but also … that there is an immediate risk for (European) companies,” European Commission spokeswoman Claude Veron-Reville said in Brussels.

Currency undervalued

The row over textiles has added fuel to a fierce debate over the value of the yuan, which has been pegged near 8.3 per dollar for a decade.

 

The EU has rejected Beijing’s charge citing import surges

Law-makers and manufacturers in the United States, as well as many independent economists, believe the peg undervalues the currency, giving China‘s exporters an unfair advantage.

 

To try to head off curbs, China introduced an export tax on 148 products on 1 January, the day the old system ended.

 

China‘s exports boomed nonetheless, angering Washington and some EU countries and prompting Beijing on 20 May to raise taxes on 74 of the targeted products, to reduce tariffs on two lines and to add yarn to the list.

Tax adjustments

The changes had been due to take effect on Wednesday.

 

However, China‘s Finance Ministry said that export taxes on 81 items would now be scrapped that day, including the planned levy on yarn.

 

“The State Council’s tax committee decided to further adjust textile export tariffs from 1 June,” the ministry said in a statement on its website (www.mof.gov.cn).

 

The EU’s executive commission, which has responsibility for 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% “safeguards” until the end of the year. They can be renewed until the end of January.