EU: Mountain of clothing goods “out on bail”

Textiles crisis between China, the EU and the US

Between 75-80 million Chinese produced T-shirts, bras, pullovers and other clothing items blocked on Europe’s borders for weeks, were let out “on bail” as a result of this week’s temporary deal between the EU and China. How long the probationary period will last, however, is unclear. The deal will reduce next year’s textile quota by up to a third for some products. And within the EU, tensions and divisions will remain.

Only after what the Financial Times described as “marathon talks into the early hours of Monday morning” did the EU’s trade commissioner, Peter Mandelson, strike a deal with China. More important business deals overruled the textile conflict this time. China’s overall exports to the EU are increasing rapidly, and the EU wants to sell China its new Airbus planes. This pressure eventually forced the governments of France and Italy to vote for the deal. In the end, only the government of Lithuania refused to endorse the settlement.

Growing inter-imperialist tensions

The latest crisis over textiles between the EU and China, and the parallel conflict between the US and China, represents growing inter-imperialist tensions. For the EU, this crisis has further undermined the authority of the Commissions in Brussels. The deal leaves both retailers (importers) and textile producers in Europe dissatisfied.

Mandelson and the EU have acted with surprise over the crisis, as if it was a tsunami or a hurricane. The abolition of the Multi-Fibre Agreement from 1 January this year, however, was agreed a decade ago, in 1995. Armed with free market rhetoric, Mandelson and other leaders thought that the market would ‘solve’ any problems. But in the spring it was clear that imports of Chinese textiles have increased by, in many cases, more than 500 per cent. The overall increase was 57 per cent in the first six months.

So, on 10 June, the EU signed a deal with China, restricting export growth to between 8 and 12.5 per cent a year in 2005-2007 for ten categories of garments. At that stage, the EU was still formally united. But within weeks it was clear that 75-80 million items, valued at 400 million euros, were stuck outside the EU’s borders. Retailers claim that these items were ordered before the deal.

Last week, the Italian government led a revolt against Mandelson. His plan was to allow these items – ordered between 10 June and 12 July, when the deal was implemented – to pass the borders. The governments of France, Portugal, Spain, Greece, Lithuania and Poland supported Italy. On the other side, were the governments of Germany, Britain, the Netherlands, Sweden and Denmark. The latter representing the big retailers. Companies like Sweden’s Hennes & Mauritz – Europe’s biggest retailer – alongside Carrefour, Metro, Marks and Spencer etc, threatened legal action if they were blocked from selling the “mountain of pullovers”. The first block – Italy, France etc – represented textile industries, claiming that 1 million jobs are threatened this year.

The Chinese government for long argued against ”eating the Year of the Tiger’s food in the Year of the Rabbit”. But the latest deal will have big effect for next year. Half of the blocked textiles will be allowed in without restrictions and half will be deducted from next year’s quota. The quota for pullovers agreed in June is 69 million. With another 50 million pullovers now entering Europe, half, 25 million, will be deducted from next year’s 69m. That is more than a third of next years’ quota. Retailers already claim that Europe could face shortages next autumn.

Mandelson and the European Commission in Brussels have only reached a temporary agreement. Discontent in, for example, Italy, could provoke the government in Rome to implement its own restrictions, thereby breaking up the EU on this field. Even the Chinese trade minister, Bo Xilai, warned against EU ”conservatives and protectionists” as a ”great danger to the voice of free trade”. Retailers will argue that they have already paid for orders covering many years. Denmark’s premier, Anders Fogh Rasmussen, also criticised the deal for preventing European companies from ”taking advantage of globalisation”.

China key for EU

China is the key country for exports from the EU. And China’s exports to the EU are predicted to grow to more than 200 billion dollar this year. Of this, textiles stand for 8.6bn. That will assist, in a large manner, in keeping profits up and inflation down, within the EU. At this week’s summit between Britain’s Tony Blair, who is President of the EU this autumn, and China’s premier, Wen Jiabao, many leading European capitalists escorted Blair. On the first day, 10 Airbus jets worth 1.5 billion dollars were sold to China.

The WTO agreement to abolish the Multi-Fibre Agreement includes the right for countries to “safeguard” against Chinese export increases, by limiting them to 7.5 per cent a year until 2008. The US, in contrast to the EU, used some of these measures against seven categories of textiles already from 1 January. Despite this, Chinese textile exports to the United States almost doubled in the first six months of this year. New negotiations between China and the US last week broke down, and the Bush administration immediately announced further one-off restrictions on, for example, bras.

Several Chinese textile industries have already announced the loss of a big share of their orders. They are hit as big European retailers have already swapped their orders to factories in Vietnam and other countries. And with the new US restrictions, between a third and half of producers of bras and similar products in China will have big problems.

Imports of sweaters, wool trousers and knitted fabrics might meet new stronger import quotas to the US by 1 October. "The trade disputes bring much uncertainty to Chinese businesses. We cannot outline the production and exports for the United States for next year," a Chinese textile manager told Business Week. In China, this can threaten hundreds of thousands of jobs, or even millions.

The textile debate in the US should be seen in the light of what the Economist magazine describes as “the anti-China hysteria in Washington, DC”. This was symbolised by the US blocking the Chinese oil company CNOOC from buying Unocal. The US trade deficit with China is estimated to grow by a third this year, from already record levels. This led to the campaign from US politicians for a revaluation of the renminbi.

The resulting revaluation in July, however, is so far only two per cent. Threats from the US Congress of trade sanctions against China are therefore on the agenda again. Trade will be a major subject when President Hu Jintao visits Bush this week.

The chaos of 50 million unsold pullovers and sweaters on the borders to Europe is an illustration of the structural crisis of global capitalism. Capitalist politicians and managers are totally incapable of solving the problems. They are just defending their own interests, not the interests of textile workers or consumers. Production is global, while ownership and control remains in the hands of small groups of capitalists.

Despite their crocodile tears, the EU is the world’s number one exporter of textiles and second largest exporter of clothing. European textile producers have had no problem slashing millions of jobs and moving production to low-wage countries. Retailers in Europe lobbied for the abolition of the MFA, so they could concentrate their production in China.

Trade restrictions on Chinese textiles will not benefit workers in the US or in Europe. Production will be moved from China to other low-cost countries since the “safeguard” rules only apply to China. Protectionism is used by politicians to find scapegoats abroad, never mind if the owners of these companies are Western capitalists.

China’s market share of the US textile market was actually very low in the beginning of the year. And neither trade protectionism nor a big revaluation of the renminbi will solve the imbalances in the US economy. The US politicians are partly using this crisis to prepare US opinion for a sharp downturn, which they want to blame on others.

The Chinese regime derives its power from rapid economic growth and nationalist propaganda, summarised in ”the peaceful rise of China”. On 20 May China raised export taxes on 74 textile items to avoid trade barriers from the EU,. But when the EU continued to demand further restrictions, Beijing implicitly threatened with problems for EU exports.

Workers can’t trust rival capitalists

Mutual dependence between rival imperialist powers as the US, the EU states and China has, so far, held back trade war measures. In the long run, however, inter-imperialist rivalries could blow up, with far-reaching and unpredictable consequences. The textiles dispute will play a key role at the WTO summit in Hong Kong in December, but the crisis could deepen a lot before then.

The working class can’t trust the ruling capitalists and politicians in any country. What is needed, in textiles as in all major industries, is a democratic and global plan, with production according to need. The textile profiteers in all countries must be nationalised under workers’ control. With a democratic plan, working conditions can improve, working hours can be shortened and jobs saved, at the same time as access to needed textiles can be guaranteed for workers and poor globally. Trade unions have to be transformed – and in China’s case founded – into fighting organisations and establish real international links with each other. In this struggle, new workers parties, with genuine socialist policies, will be built, so that the parasitic capitalist system can be replaced with democratic and global socialism.

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September 2005