WRITTEN QUESTION E-0563/02

by Concepció Ferrer (PPE-DE) to the Commission

(28 February 2002)

Subject: Study on the consequences of China's accession to the WTO for the European textile industry

China's accession to the WTO will provide a boost to the world economy. The Chinese Government recently launched a trade offensive for South-East Asia aimed at reaping the full benefits from its membership of the World Trade Organisation. Only a fortnight ago, China and India sought to establish closer ties and explore possibilities for cooperation through a free-trade agreement. Talks have also begun with Hong Kong with the same aim in mind.

Has the Commission carried out, or will it carry out, a study on the consequences of China's accession to the WTO for European undertakings, with particular reference to the textile industry?

Answer given by Mr Lamy on behalf of the Commission

(12 April 2002)

Quantifying precisely the overall impact of China's accession to the World Trade Organisation (WTO) on the Community is extremely difficult because of the scope of the commitments made by China in the context of her accession and the systemic changes that the accession will trigger within this country.

Chinese commitments constitute a very substantial market-opening package, covering both specific trade barriers and systemic issues and ranging from tariff reductions, quotas phasing out, to the opening of the services sector or the elimination of restrictions on foreign investment. It is in particular worth noting that China's trade regime will be significantly more liberal than most existing WTO members of a comparable level of development.

China's accession will therefore offer increased opportunities to Community firms in terms of both exports and investment, and the package of Chinese commitments incorporate to a large extent the priorities of the Community industry. General studies show that the overall gains are positive for the Community [example: Ianchovichina, Elena, and Will Martin, Trade Liberalization in China's Accession to the World Trade Organization, Washington: World Bank, June 2001].

The actual implementation by China of her WTO commitments will be closely monitored by the Commission, in co-operation with all concerned actors on the European side. Implementation issues will be raised both in bilateral contacts with the Chinese administration and in the framework of the Transitional Review Mechanism which has been specifically established in the WTO to monitor the first ten years of China's WTO membership.

One of the objectives of the Commission in the context of the WTO accession negotiations was also to foster the integration of China within the global economy and within the region, in order to promote its stability and its development. The Commission therefore is closely monitoring the current debate in Asia regarding free trade area initiatives, which are referred to in the question of the Honourable Member, and their adherence to the criteria set by WTO.

On the other hand, China's accession does not mean substantially new commitments for the Community, except the phasing out of specific quantitative restrictions applied to China by 2005 (which will take place in parallel to the phasing out of China's own quota). This applies to the three industrial products for which the Community still maintains quotas: footwear, ceramic tableware and porcelain tableware, and to the Community's remaining textile quotas, which must be dismantled since China fell under the normal rules of the Agreement on textiles and clothing (ATC), implying an elimination of quotas by the end of 2004. Immediately upon accession, the Community has granted China integration under phase 2 and 3 under the ATC, thus liberalising some restrictions and granting the corresponding increased growth rates for the quotas remaining. As from 2002 restrictions are in force for a total of 39 textile and clothing products.

In the period until the end of 2004 the impact of China's accession on its exports to the Community will be modest as the growth rates of the quotas are low, and will only marginally increase during this period. Beyond 2005, and on the basis of China's past performance characterized by a very high utilization of quotas, it is possible, however, that Chinese operators may be able to draw substantial commercial benefit from increased export possibilities to the Community market, either directly or by substituting other countries' exports. In the latter case the impact on the Community market should of course be less harshly felt.

The Commission will be launching shortly a study on the policy implications of the 2005 trade liberalisation on the Community Textile and Clothing sector and trade, where the impact of the elimination of textile and clothing quotas vis-à-vis China will be examined.