China: China-EU clash over textiles

“We hope that the EU can acknowledge fully the negative influence on bilateral trade relations when it imposes limits on Chinese textile products.”

This was the sharp response from Chinese spokesman Chong Quan to threats from the EU against surging Chinese textile exports. Imports of sweaters, for example, from China to the EU increased 534 per cent in the first three months this year. The main threat from textile trade liberalisation since 1 January, however, is against millions of jobs in poor countries like Bangladesh.

The growing EU lobby against Chinese textile imports is another example of growing inter-imperialist tensions and EU leaders playing the nationalist card. France’s president Jacques Chirac has been to the forefront in demanding the EU take measures against China. He wants to disarm the No campaign in the referendum on 29 May on the EU constitution. The No camp point out that the neo-liberal constitution is a threat to jobs. Chirac’s reply is that only the EU jointly can block ”unfair” trade and save jobs. Whether the EU agrees to act is another question, involving the aspirations of European transnational corporations in China. So far, the EU has only agreed to a two-month investigation and China has already warned about the ”negative influence on bilateral trade relations”.

Last year’s trade between the EU and China, worth $163 billion, made the EU China’s biggest trading partner. For the EU, China came second after the US. Any disruption could be a threat to European sales of high-value exports such as trains, airplanes, energy equipment etc.

No ”fair trade”

Under capitalism there is no ”free” or ”fair” trade. Poorer countries are constantly subject to exploitation, blackmail and outright robbery. Europe itself is the world’s leading exporter of textiles and the second largest exporter of clothing, employing more than two million people. Instead of letting ”the market decide”, the textile industry lobby has demanded action since March. It pointed out that imports from China in January-February increased by 1,940 per cent for tights and pantyhose and 893 per cent for pullovers. Import of men’s trousers increased in the first quarter by 413 per cent. Thirteen of the 25 EU governments supported the demand for restrictions, with Italy (the biggest textile producer in the EU) and France in the lead.

“Europe can’t stand by and watch its industry disappear”, said Peter Mandelson, the EU trade Commissioner. China has already introduced voluntarily taxes on its textile exports, but Mandelson is requesting more. Otherwise, the EU is threatening to take protectionist measures. When China negotiated entry to the World Trade Organisation (WTO) in 1999, it agreed with the US to limit the export increase to 7.5 per cent a year and allow the use of ”safeguard measures”. The US and Turkey are two countries already using these safeguard measures against specific categories of Chinese textiles. What is not yet clear, however, is how much of the increase in imports to the EU is from European-owned businesses, and if it has affected mainly European textile industry or industry in other countries. China has pointed to the simple fact that the EU has 25 member states this year compared to 15 in the first quarter of 2004.

Quotas since 1974

The abolition of the Multi-Fibre Agreement (MFA) on 1 January was in accordance with the Agreement on Textiles and Clothing (ATC), agreed when the World Trade Organisation (WTO) came into being in 1995. The MFA itself has been supervising the textile trade since 1974. It was basically a system of quotas, divided between producer countries. Textile production moved to low-wage countries.

“In Bangladesh, for example, the industry has grown from 400,000 people and 800 factories in 1990 to nearly 2m people and 4,000 factories now. Nine-tenths of the workers are women.” [The Economist 11 Nov 2004].

In 2002, more than 80 per cent of exports from Bangladesh were textiles and clothing. For Cambodia and Pakistan it was 70 per cent, for Sri Lanka 50 per cent, Tunisia over 40 and for Turkey close to 40 per cent of all exports. Behind the switch to ”liberalisation” were several factors, the main one being the possibilities for the textile industry in China. Retailers and the industry globally wanted free hands to move production as they want. Capitalist globalisation is economic imperialism, increasing exploitation in low-wage countries while undermining worker’s conditions and trade unions in the developed capitalist world. For example, 60 per cent of French clothing brands are produced abroad.

With the MFA in force, China in 2002 accounted for only 16 per cent of the US clothing market. In the coming years, the WTO predicts its share will increase to 50 per cent in the US and 39 per cent in Europe. The “communist” dictatorship offers the lowest wages and the longest working hours, the biggest scale of production and incredible “flexibility”. In contrast to Bangladesh, China also produces the raw material needed. Not least European manufacturers and retailers have prepared themselves for using China as a manufacturing base. Already between 2001 and 2003, textile imports to the EU doubled. Textile and clothing retailers have made huge profits since 1 January. The Swedish company H&M, Europe’s largest fashion retailer, increased its profits 29 per cent in the first quarter of this year compared to 2004. To act without being restricted by quotas is heaven for the retailers.

30 million workers

”The liberalisation of trade in textiles and clothing has hit the industry like a massive earthquake whose effects are being felt in all parts of the world. Today, production base shifts threaten the jobs of as many as 30 million workers directly and the jobs of a further 30 million who feed off the industry”, said Neil Kearney, General Secretary of the Brussels-based International Textile, Garment and Leather Workers’ Federation, speaking in Montreal last week.

In this statement Kearney echoes the so-called “Istanbul declaration”, in which 50 countries demanded the MFA be retained for another three years in an attempt to avoid drastic social consequences. The response of the WTO, however, was to refuse to even discuss the issue. Kearney from the trade union international gave further examples relating to this year:

”In the EU, the estimates are that one thousand jobs are being lost per day as more than 50 companies close. In the US, nearly 18,000 US jobs have disappeared this year…”

The US textile industry lost 655,000 jobs from 1995 to 2000 and now employs around 700,000. Worse off are some both poorer and more dependent countries:

“Kenya’s trade minister estimates that 20,000 jobs have already been lost this year and the country’s garment industry has no orders beyond April. Cambodia says 20 factories have closed with the loss of 26,000 jobs – one tenth of employment in the industry. Mauritius claims 70,000 jobs are under threat. Sri Lanka has seen 46 factories closed with 26,000 jobs lost”.

In Bangladesh, often predicted to suffer most from the new system, the effects will not be seen until later this year. The IMF predicted that two million jobs could be lost. In the first year alone, Bangladesh would loose 650m dollar in incomes. The adjustment and training offered from the IMF, however, is only $75m spread over a few years.

No way out with the “market” in charge

The speech from the union leader Kearney was unfortunately held at a joint conference of unions, textile companies and governments from Europe and North America. The theme of the meeting was to enhance the competitiveness of the industry. Kearney’s own conclusion was ”to demand that all governments who are members of the World Trade Organisation insist that the impact of trade liberalisation on the sector be a key item on the agenda of the upcoming WTO Ministerial Meeting in Hong Kong next December”. This means to put the workers’ future into the hands of the same managements and governments that caused the job losses in the first place!

Instead of fighting capitalist globalisation, these union leaders are capitulating, despite the terrible facts they report. Their best hope is to delay the job slaughter, not stop it. Protectionism will not save jobs, only lead to retaliation. But it is even doubtful how far the politicians will go with protectionism at this stage, because of their overall dependence on business with China. Protectionist moods are growing against China, particularly in the US Congress, and at some stage a vicious circle will begin. Kearney points out that ”Investment in China’s textile and clothing industry has been phenomenal – US$21 billion in the past three years during which it increased its capacity by 50 per cent”. Included in these figures are not just Chinese companies, but also US and European textile giants. These investments have not yet created a lot of jobs in China. In fact, two million textile jobs have been lost in China since 1995, because of modernisation of the industry.

Further crisis

The WTO wants the EU to wait a year before considering formal action. This may also be the outcome, but only after the French referendum. The trade row with China is part of continued crisis for the EU, but also of China’s rise as a world power. The EU textile companies have focused on China, but there is a less conspicuous debate over India as well. In the beginning of the year, the EU promised that countries affected by the tsunami catastrophe would be included in a general system of preferences (GSP) for trade. But a number of EU governments want to exclude Indian textiles from the GSP. The issue is still unresolved. Both India and Pakistan are generally tipped to be second-rank winners (after China) from the new system. The global textile trade is worth 500 billion US dollars. This business is completely unplanned on a global scale. The big textile companies are producing profits for their owners, not textiles according to need. They have no common interest with workers in Europe, North America, China or the countries where thousands of jobs are now being lost.

Workers everywhere must demand nationalisation of the textile industry under worker’s control and management. All company books should be opened and all profits put under democratic worker’s control. Only international worker’s struggle to abolish capitalism and establish a democratic and socialist world can solve the crisis of jobs and production in the textile industry.

This article was first published on the China worker website (

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May 2005