China is the country which reap the most benefits of EU's generalized schemes of preferences (GSP) among the 178 nations covered by the GSP. No longer . Chinese textiles will be excluded from the club from 2006 and face a tariff of 12 percent. Insiders have estimated losses of 100 million USD for Chinese textile businesses.

The power of Made-in-China

The overhaul in China's textile industry has given more teeth to its companies. They stand out among China's traditional sectors with comparative advantages in terms of export capability. The customs statistics has proved textiles and apparels are the vanguard of the 50 main export commodities.

The 25 EU nations are one of the largest markets for Chinese textiles and apparels. EU's removal of 51 percent import quotas for Chinese textiles in 1995 unleashed the potential of Chinese exports.

In 2003, China doubled its exports of quota-free textiles and apparels to EU valued 3.8 billion euros from 1.9 billion euros in 1999. And it expanded its market share there to 43.7 percent from 23.7 percent.

According to the latest data from EU, textiles and apparel imports from China, which registered at 1.8 billion euros and 11.2 billion euros respectively in 2003, accounted for 10.7 percent and 19.6 percent of EU's total imports of the two commodities, making China the largest exporter of textiles and apparels of EU.

Competition

WTO members agreed at the Uruguay round in 1994 to lift all import quotas for textiles and apparels in 2005. EU and US textile markets which have long been protected under the quota system will have to face the surge of cheap textiles and apparels from China and India.

Experts see the irrevocable trend of the growth of export of Chinese textiles and apparels when the quotas are not there. EU's most sensitive products will especially be hit hard. Experts believe this will happen although EU as the world's largest textile exporter and the second largest apparel seller boasts competitive edge in medium and high end products, fashion and tech-intensive textiles over China which build its export mainly on textiles in bulks and less tech content.

About 2.7 million workers are working for 177,000 businesses in EU. Production and employment have both been down in the past four years due to the slow economic growth of EU and some of its targeted overseas markets, the appreciation of euro and the relocation of production facilities in low costs areas. But EU still turned out 225 billion euros worth of textiles and apparels in 2003.

Market fenced in

EU has proposed an array of measures to shelter its textile and apparel industry to respond to the concern from the sectors, including a EU-China dialogue mechanism on textiles, a monitoring system on the quantity and prices of the imports of textiles and apparels from China on a monthly and quarterly basis. The monitoring system is designed to slow down the pace of Chinese textiles and apparels into the EU market by evaluating the access of China market and China's fulfillment of its WTO commitments.

This is far from all. On October 20, EU Commission declared its revised GSP in which the market share is the only benchmark for eligibility.

Under this criteria, GSP will be close to Chinese textiles and apparels from 2006. It is widely believed that this action will bring more negative effects to Chinese textiles and apparels than any other measures.

EU recognizes China as a developing economy which is entitled to GSP treatment. However, it insisted that China's textile exports in bulks are competitive enough to expand the market share in EU without the favorable policy.

The Report on Foreign Trade of Chinese Textiles and Apparels issued by the China Import and Export Council of Textiles also said 17 percent of EU's total imports last year were textiles and apparels from China.

All of these underlay EU's decision to raise its import tariff on Chinese textiles and apparels to the normal level of 12 percent from the existing 9 percent on average.

The year of 2005 is drawing nearer and nearer. More and more sectors will have to face the challenge brought about by the country's WTO commitments. What the textile industry is experiencing as one of the sectors with deepest involvement into the world trade is a typical example of how bumpy the road will be.

But the changes brought about by WTO do not necessarily mean only challenges. There are opportunities. And the best way of adapting to the changes is reform in the thrashings of a sea of changes.

By People's Daily Online