24-hour hotline : 23 922 922

e-mail address : enquiry@tid.gov.hk

 19 May 2005

Dear Sirs,

Commercial Information Circular No. 173/2005

Notice to Exporters: Series 2 (EU) No. 9/2005

European Union (EU)* : Possible Safeguard Action on Chinese Textiles
and Clothing Products 

Further to the Commercial Information Circular No. 151/2005 cum Notice to Exporters: Series 2 (EU) No. 8/2005 all dated 29 April 2005, the EU Trade Commissioner announced on 17 May 2005 that he would propose to the European Commission (EC) that formal consultations with the Mainland of China (the Mainland) should be launched in relation to T-shirts (category 4) and flax yarn (category 115) which are among the nine categories of textiles and clothing (T&C) products currently under safeguard investigations.

Details

2. On 29 April 2005, the EC launched investigations into the extent of market disruption caused by nine categories of Chinese T&C imports and sought informal consultations with the Mainland. While these investigations can take up to 60 days, the EC is proposing to invoke the emergency provisions under the EC guidelines by seeking direct formal consultations with the Mainland on T-shirts and flax yarn. 
   
   
3. According to the information released by the EC, the investigations have allegedly revealed serious market disruption in these two categories that warrant immediate formal consultations with the Mainland: 

1. Compared with the same period in 2004, imports from the Mainland for January-April 2005 have risen by 187% for T-shirts and 56% for flax yarn. For T-shirts, import prices have dropped by 36% over the same period. 
   
   
2. Production, profitability and employment in the EC's T&C industry have deteriorated dramatically. Production of T-shirts in Greece, Portugal and Slovenia has dropped by 12%, 30-50% and 8% respectively. For flax yarn, production across Europe has fallen by 25%, turnover by 25% and employment by 13% over the same period in 2004. 
   
   
3. Exports from traditional suppliers of T-shirts such as Morocco, Tunisia and Romania have been displaced, recording a drop in imports to the EU of 8%, 22% and 29% respectively. 
   
   
4. The sudden surge of T-shirt imports is also damaging the textiles sectors of several vulnerable developing countries. In particular, exports of T-shirts to the EU from Pakistan, Sri Lanka and Bangladesh have dropped by 36%, 25% and 9 % respectively since the beginning of 2005. 
   
   
5. In terms of market share, China's share of the EU's market for T-shirts have grown from 7% in 2004 to 18% over a three-month period in 2005; for flax yarn, China's share has grown from 7% in 2004 to 13% in the first quarter of 2005. 
   
   
6. In the first four months of 2005, EU T-shirt imports from the Mainland totalled 243 million pieces, up by 159 million pieces over the same period of 2004, which is more than half of the yearly EU production of T-shirts. 
   
   
7. For flax yarn, imports from China reached 1,788 tons in the first quarter of 2005, and its share of total imports already stood at 45% at the end of February. On the other hand, suppliers such as India and Morocco have lost 67 % and 30% of exports respectively in the first quarter of 2005. 

4. The EC will present a proposal on launching formal consultations with the Mainland to the EU College of Commissioners and consult Member States in the Textiles Committee. With the Committee's agreement, the formal request will be delivered to the Mainland before the end of May. Formal consultations can last for a maximum of 90 days.
   
   
5. In accordance with the EC guidelines, within 15 days upon receipt of the formal consultations request, the Mainland is expected to limit its textiles exports in the affected categories to the level of the first twelve of the fourteen months preceding the month in which the request for formal consultations was made (i.e. from March 2004 until end of February 2005), plus 7.5%. Should the Mainland not do so, the EC can impose the quantitative restrictions unilaterally after consulting the Textiles Committee. If quantitative restrictions are put in place before October 2005, they will remain in force until 31 December 2005. 

Enquiries

6. For enquiries concerning the content of this circular, please contact the undersigned at 2398 5427.

Yours faithfully,

(Miss Sheree FU)

for Director-General of Trade and Industry 

The EU includes Austria, Belgium, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden and the United Kingdom.

Note : While every effort is made to ensure the accuracy of the above information, the Department cannot guarantee this to be so and will not be held liable for any reliance placed on the same.