The agreement, thrashed out in Shanghai by EU Trade Commissioner Peter Mandelson and Chinese Commerce Minister Bo Xilai and announced on Friday, came after months of tension over an explosive rise in shipments of cheap exports from China.
"The overall settlement offers a fair deal for China while giving respite and much-needed breathing space to textiles industries in Europe and developing countries," Mandelson said.
The rise, which has generated fears for the future of the garment industry and millions of jobs in Europe and the United States, was unleashed by the 1 January abolition of a decades-old global system of quotas.
Resorting to terms agreed when China joined the World Trade Organisation (WTO) in 2001, the US has already slapped temporary restrictions on seven garment and textile products, provoking an angry reaction from Beijing.
The 25-nation EU had been due to follow suit by early next week, limiting shipments of T-shirts and flax yarn to 7.5% over the previous year had China not taken voluntary steps to curb exports of these products to this level.
These so-called safeguards would have been effective only until the end of this year, making it likely the EU would have had to seek their re-application in six months' time.
The pact involves a wider range
of products than earlier ones
The pact agreed by Mandelson and Bo caps exports on a wider range of products and will remain in effect for a longer period.
"The agreement provides for agreed transitional growth rates between now and 2007, followed by a further year during which both sides will work together closely in the hope that trade is conducted without further interference in this sector," Mandelson told a news conference with Bo in Shanghai.