The　European　Commission　has　decided　to　publish　guidelines　that　will　clarify　under　what　circumstances　it　would　consider　safeguard　action　against　textile　and　clothing　imports　from　China.　The　guidelines　relate　to　the　Textiles－Specific　Safeguard　Clause　written　into　China’s　Protocol　of　Accession　to　the　WTO　in　2001　which　was　incorporated　into　EU　law　in　2003.　The　guidelines　establish　procedures　and　criteria　for　the　objective　and　transparent　use　of　safeguard　proceedings.　By　establishing　when，　and　on　what　basis，　action　could　be　taken，　the　guidelines　provide　clarity　and　predictability　for　both　China　and　European　textile　producers.　

 

　　Background:　the　liberalisation　of　global　trade　in　textiles　and　the　challenge　of　China

 

　　With　the　expiry　of　the　WTO　Agreement　on　Textiles　and　Clothing　on　1　January　2005，　all　WTO　members　were　required　to　lift　their　remaining　quotas　on　textiles　trade.　The　Uruguay　Round　provided　for　the　gradual　liberalisation　of　this　trade　over　a　period　of　ten　years　from　1　January　1995　to　31　December　2004，　allowing　time　for　adjustment.　

 

　　The　European　Commission　believes　that　the　removal　of　quotas　in　global　textile　trade　is　an　important　prize　for　progressive　trade　liberalisation.　Free　trade　in　textiles　will　provide　global　competitive　disciplines　that　will　improve　productivity　and　lower　prices　for　consumers.　

 

　　This　competitive　pressure　will　be　driven　chiefly　by　China，　whose　formidable　production　and　export　capacity　will　quickly　reinforce　its　status　as　one　of　the　world’s　largest　producers　and　exporters　of　textile　and　clothing　products.　According　to　some　estimates，　China’s　share　of　the　European　clothing　import　market　is　expected　to　rise　to　over　a　third:　in　the　United　States　this　figure　could　be　as　much　as　50%.　

 

　　Managing　this　transition　presents　a　challenge　both　for　China　and　its　trading　partners，　many　of　whom　have　textile　industries　of　their　own.　Textile　producers　in　vulnerable　developing　countries　like　Bangladesh　have　to　adjust　to　new　competitive　pressures.　Euro－Mediterranean　partners　like　Morocco，　Tunisia　and　Turkey，　whose　textile　industries　trade　as　much　as　95%　of　their　textile　products　on　the　EU　market，　fear　that　their　exports　will　be　displaced　by　China.　European　textiles　producers　also　face　tough　competition　from　China.　For　all　of　these　industries，　a　sudden，　steep　and　sustained　surge　in　Chinese　textiles　exports　could　be　highly　damaging.　This　is　why　liberalisation　has　to　be　carefully　managed.

 

　　In　anticipation　of　this，　China’s　protocol　of　accession　to　the　WTO　in　2001　included　a　Textiles－Specific　Safeguard　Clause　(TSSC).　This　clause　allows　for　measures　to　be　taken　as　a　last　resort　to　prevent　a　sudden　and　sustained　surge　in　Chinese　textiles　exports　from　impeding　the　orderly　development　of　trade　in　clothing　and　textiles　products.　It　allows　for　such　measures　until　2008.　

 

　　The　guidelines　published　by　the　European　Commission　on　6　April　2005　set　out　clearly　and　transparently　how　and　on　the　basis　of　what　criteria　the　EU　will　interpret　and，　potentially，　implement　the　TSSC.　

 

　　The　publication　of　guideline　implies　no　automatic　use　of　safeguards，　but　it　equips　the　EU　to　take　effective　and　appropriate　action　should　the　need　arise.　

 

　　The　2001　Textile－Specific　Safeguard　Clause　(TSSC)　

 

　　The　Textile－Specific　Safeguard　Clause　(TSSC)　in　the　Chinese　Protocol　of　Accession　to　the　WTO　can　be　invoked　by　any　WTO　member　able　to　show　market　disruption　by　Chinese　textile　imports　serious　enough　to　“impede　the　orderly　development”　of　their　textile　trade.　

 

　　The　triggering　state　must　first　request　consultations　with　China，　asking　that　it　limit　its　shipments　of　the　products　cited　to　the　level　of　the　first　twelve　of　the　fourteen　months　prior　to　the　complaint，　plus　7.5%　(6%　for　wool　products).　If　this　is　not　effectively　done，　WTO　member　may　impose　quantitative　restrictions　on　imports　of　those　products　at　above－mentioned　levels.　Such　measures　may　be　in　place　for　only　one　year，　although　they　can　be　reapplied　for　after　the　expiry　of　that　period.　Such　measures　can　only　be　applied　until　the　end　of　2008.

 

　　The　TSSC　is　an　exceptional　provision　of　a　transitional　nature.　It　is　additional　to　the　other　forms　of　safeguarding　permitted　under　WTO　law　or　jurisprudence.　The　requirement　of　consultation　with　the　Chinese　and　quickly－expedited，　short－term　safeguard　measures　reflect　the　fact　that　it　is　intended　to　be　an　additional　means　to　facilitate　the　transition　to　quota－free　trade　in　textiles.　Its　terms　clearly　allow　for　growth　in　Chinese　exports.　

 

　　As　with　all　safeguards，　the　TSSC　is　a　tool　of　last　resort，　intended　to　allow　complainant　industries　time　to　restructure　and　adapt　to　the　new　level　of　competition.　

 

　　The　TSSC　was　transposed　into　European　law　in　2003　in　Council　Regulation　3030/93.　

 

　　The　Guidelines

 

　　Data

 

　　Assessments　will　be　based　on　real　import　data　collected　and　submitted　to　the　Commission　by　customs　authorities　of　Member　States.　Assessments　will　be　based　on　unit　prices　and　import　patterns　averaged　over　a　period　of　a　year，　or　determined　pro－rata　on　the　basis　of　a　period　in　principle　of　not　less　than　three　months.　

 

　　Alert　Zones

 

　　The　guidelines　published　by　the　European　Commission　on　April　6　2005　establish　Alert　Zones　that　will　act　as　an　early　warning　system　for　market　disruption　by　Chinese　textile　exports　(see　annexed　Tables　A　and　B).　A　rapid　rise　or　surge　in　imports，　or　a　sudden　and　precipitous　drop　in　unit　value　in　any　product　category　will　place　it　within　an　Alert　Zone.　

 

　　The　Alert　Zones　determined　by　the　Commission　allow　for　generous　increases　in　textile　and　clothing　imports　from　China.　They　reflect　China　’s　historic　market　share　vis　a　vis　other　importers　subject　to　quotas　in　2004　in　affected　product　categories　and　levels　of　EU　production　in　like　products.

 

　　Investigation　and　criteria　for　safeguard　action

 

　　If　alert　levels　are　exceeded，　the　Commission　can　initiate　in　its　own　right　an　investigation　into　market　disruption.　It　can　also　do　so　at　the　request　of　a　Member　State　.　Such　an　investigation　will　also　be　initiated　on　the　presentation　of　clear　and　acceptable　evidence　by　industry　of　the　need　for　safeguard.　

 

　　Parallel　to　launching　any　investigation，　the　EU　will　initiate　informal　consultations　with　China.

 

　　Investigations　will　allow　21　calendar　days　for　interested　parties　to　present　their　opinions，　and　60　days　for　the　completion　of　the　investigation　and　informal　consultations　with　the　Chinese.　

 

　　In　determining　the　existence　of　market　disruption　the　Commission　will　consider　a　number　of　factors.　As　way　as　assessing　the　potential　threat　to　domestic　industry，　investigations　will　consider　the　possible　damage　done　to　textile　exporters　in　vulnerable　developing　countries　and　producers　in　the　Euro－Mediterranean　region　who　are　in　many　cases　dependent　on　the　EU　market　and　whose　market　share　may　be　displaced　by　Chinese　exports.　

 

　　The　Commission　will　also　consider　any　positive　effects　of　rising　Chinese　imports　or　falling　unit　prices　in　the　form　of　dividends　for　European　consumers　through　falling　prices　and　benefits　for　the　many　European　companies　producing　textiles　in　China　.　

 

　　Formal　Consultation　with　China

 

　　At　the　end　of　the　investigation　period，　in　consultation　with　Member　States　in　the　Textiles　Committee，　the　Commission　will　determine　whether　to　request　formal　consultations　with　the　Chinese　as　required　by　the　terms　of　the　TSSC.　

 

　　Within　15　days　from　any　such　request　for　formal　consultations　China　will　be　expected　to　have　taken　measures　to　limit　exports　at　the　average　level　of　the　first　twelve　of　the　fourteen　months　preceding　the　initial　investigation　plus　7.5%　(or　6%　in　the　case　of　woollen　products).　

 

　　Safeguards

 

　　Should　China　not　do　so，　the　Commission　will　immediately　launch　the　procedure　for　putting　in　place　quantitative　restrictions　designed　to　hold　imports　to　the　above－mentioned　levels.　As　required　by　the　TSSC，　these　measures　will　remain　in　place　for　one　year　only，　to　allow　European　industry　breathing　space　to　adapt　to　changed　conditions　of　competition.　

 

　　Emergency　Procedures

 

　　The　guidelines　also　allow　for　emergency　procedures　in　the　case　of　a　rise　in　imports　of　such　magnitude　that　serious　material　injury　to　EU　industry　is　imminent.　In　this　case　formal　consultation　with　the　Chinese　could　be　launched　without　a　preceding　investigation

 

Annex

　　1/　Formulae　for　determining　consultation　levels　

　　A/　Formula　to　determine　the　consultation　levels

　　B/　Levels　below　which　in　principle　the　TSSC　should　not　be　invoked