Trade-offs and tribulations within the politics of pants

PUBLISHED : Wednesday, 27 April, 2005, 12:00am
UPDATED : Wednesday, 27 April, 2005, 12:00am

Peter Mandelson, the European Union's urbane trade commissioner, wants China to slap restrictions on its own textile exports. If China did, it would be mightily convenient for Mr Mandelson, his cohorts in the European Commission and a clutch of national governments across the continent.

By curtailing its exports voluntarily, Beijing should be able to look for a grateful Europe to lift its arms embargo on China, or at least for the Europeans to pipe down in the debate over the yuan's valuation.

Speaking on a flying visit to Hong Kong yesterday, Mr Mandelson warned that Europe's textile industry was in danger of being 'swept away' by a flood of Chinese imports. 'We cannot ignore this,' he declared.

The commissioner's visit came the week after Europe released data showing Chinese clothing imports grew at breakneck pace in the first three months of the year following the scrapping of a 30-year-old quota system. Europe's imports of Chinese sweaters, for example, shot up by 534 per cent compared with the first quarter of last year.

With imports of eight other classes of clothes, including brassieres and men's trousers, rising at rates in excess of 50 per cent, Mr Mandelson announced an investigation that could lead to the EU invoking safeguard clauses in China's World Trade Organisation accession agreement, which allow for further quotas on Chinese textile imports until 2008.

But Mr Mandelson is in a tricky position.

Germany, Britain and Sweden oppose the safeguards while countries with sizable clothes industries, such as France, Italy and Spain, are demanding protection against cheap Chinese imports.

Last week, French Industry Minister Patrick Devedjian said Chinese imports threatened 7,000 French jobs a year while French President Jacques Chirac thundered against 'a brutal and unacceptable invasion'.

French attitudes matter deeply to Mr Mandelson just now. On May 29, France votes in a referendum on the EU's new constitution.

With opinion polls indicating a 'no' vote is likely, Eurocrats like Mr Mandelson are coming under increasing pressure to show that Europe can deliver practical protection for jobs ahead of polling day.

That is awkward.

Although it is very clearly in Mr Mandelson's own interests as a European commissioner to do his best to assist the chances of a French 'yes' vote, he will be reluctant to upset the Germans and Britain, or China, for that matter.

In any case, the EC's investigation is unlikely to conclude before June, too late to sway sentiment in France.

The ideal solution for Mr Mandelson, therefore, is for China to impose its own restrictions on textile exports to Europe, possibly by raising export duties.

That would avoid internal frictions within the EU while allowing the commission to trumpet its diplomatic success in preserving European jobs.

'It's in China's own interest to take the necessary action to avoid formal safeguards,' Mr Mandelson said, and naturally China would be entitled to expect something from Europe in return.

Yesterday, Mr Mandelson indicated one form the return favour might take when he repeatedly ducked questions about the value of the Chinese currency, saying it was not his place to comment on the yuan.

That is an about-turn from comments he made in February during a visit to Beijing, when he called for the yuan to be repegged to a basket of currencies, rather than just the US dollar.

On the same occasion, he also hinted that Europe would be more willing to lift its arms embargo on China if only Beijing were to take more account of Europe's concerns on the trade front.