EU rules out Chinese trade war

European Union Trade Commissioner Peter Mandelson vowed yesterday not to be rushed into any hasty action in a dispute with China over textile imports and ruled out a trade war with Beijing.

But, at talks in Paris, he and Chinese Trade Minister Bo Xilai gave no sign that they had moved any closer to a compromise on the surge in textile and clothing imports from China since a global quota regime ended on January 1st.

Several European nations want emergency action to curb the boom in cheap imports and the US has taken steps that could lead to limits on shipments from China by opening probes into about 10 categories of imports.

"Both of us know there is much more at stake in the long term for trading and economic relations between Europe and China for us to allow the issue of textiles to undermine that strategic partnership and trading relationship we have," Mr Mandelson said.

"There is no question of any diplomatic break or any sort of trade war between Europe and China," he said. "I'm not going to be bounced into any hasty or precipitated action."

The EU's executive commission began an investigation last week into the increase in imports of nine Chinese textile and clothing products to the 25-member bloc, opening the way for limits to be placed on shipments from China in 150 days.

These could cover imports of items such as pullovers and men's trousers, which have risen by more than 400 per cent since the quota system was scrapped.

The EU is investigating nine categories of product and reserves the right to speed up action in areas where the situation is considered "more critical", Mr Mandelson said.

If the EU commission decides there has been serious market disruption, it can evoke the World Trade Organisation's (WTO's) "safeguard clause" that lets member states restrict textile imports if a sudden surge threatens to upset their markets.

Mr Bo told reporters that he did not believe use of the clause against China could be justified.

"Clearly, we hold the view that this clause is discriminatory in nature," Mr Bo said. "According to our judgment... there are insufficient conditions for such measures to be taken."

He said there had not been any serious market disruption. "We only see growth in our exports but not a market destruction."

Mr Bo sought on Tuesday to soothe the EU's mounting concerns by promising a sharp slowdown by the summer thanks to tax and tariff steps taken by Beijing.

Although there was no obvious sign of progress in the talks, Mr Mandelson said they had taken place in "a very good atmosphere".

He said an EU team would visit Beijing in the coming week to keep the dialogue going.

China agreed to the "safeguard clause" after joining the WTO in 2001. The provision allows WTO member states to limit the rise in Chinese imports to 7.5 per cent above the previous year.

France, Italy, Greece and Spain have asked the commission to cut short its inquiry and move to formal consultations with Beijing, which would then have 15 days to curb exports voluntarily or face external action.