Germany Backs Rise in Chinese Textile Quota

Germany on Monday joined a growing chorus of European countries asking Brussels to relax curbs on Chinese textile exports. Retailers now expect that women's blouses and bras will soon join the list of clothing items blocked in transit between China and Europe.

The shipment difficulties have arisen since China breached its 2005 export quotas for sweaters and men's trousers, two of the 10 categories covered by a China-EU textiles agreement signed in June.

By on Monday, China had exhausted 89 per cent of this year's quota for blouses and 84 per cent for bras, according to the EU's quota monitoring system.

Thomas Rasch, managing director of the German fashion federation, said: “If nothing is done, certainly these categories will also be exhausted this month. Every category is a very serious problem for the people and companies dealing with them.”

The German government has written to Peter Mandelson, EU trade commissioner, expressing concerns about financial losses for clothing importers.

Thomas Östros, the Swedish trade minister, yesterday told the FT that he was trying to co-ordinate with his Danish and Dutch counterparts an attempt to force a “substantial” increase in the quotas agreed with China in June.

He added: “This discussion shows how absurd it is to shelter oneself with quotas. It is a dead-end and it only causes distress for retailers and consumers. The protectionist side has been much too strong in the (EU) trade discussion policy so far.”

Pär Darj, head of investor relations at Hennes & Mauritz, which on Monday reported weaker-than-expected July sales, argued the situation was more worrying for smaller companies, even though the Swedish fashion multinational sources 30 per cent of its clothing from China.

He said: “There's a big number of smaller retailers that are completely stuck and don't have the flexibility that we have to source from other countries and re-direct production.”

The European Commission had given the 25 EU governments until Monday to supply comprehensive trade figures to assess the cost value and volumes of stranded goods. However, a Commission spokeswoman said that Brussels might need more time to analyse the data and gauge the potential damage to retailers.

China is on Tuesday due to start separate bilateral textiles negotiations with the US, with a view to replacing existing US quotas on seven categories of textiles with a broader agreement to limit clothing exports until 2008.

French retailers are warning that pullover and trouser shortages in big department stores this September could mean children going back to school without new clothes, or in last year's uniforms, for la rentrée scolaire.

But François Loos, French industry minister, suggested retailers should rethink their Asian sourcing strategy. He said: “The measures taken by the EU at the initiative of France seem to be working. They pose a problem to distributors and I invite them to turn to the Euro-Mediterranean industry.” However, Mr Östros of Sweden and others have warned about likely lawsuits from retailers because of blocked shipments ahead of the important autumn and winter trading season. Gelco, a clothing company that employs 300 people in Germany, said on Monday it was going ahead with such legal action in Germany after suffering an estimated €1m loss on awaited orders from China. Jürgen Richter, chief executive, said Gelco had 38,000 sweaters held up by German customs because of China's quota exhaustion.