The European Commission (EC) is due to make a decision on October 20 on the reform of its Generalized System of Preferences (GSP), which may lead to the exclusion of Chinese-made textiles from the new version.

GSP provides benefits to developing countries by enabling qualified products to enter the markets of preference for free or at reduced rates of duty. The new version of GSP will be implemented from 2006 to 2015.

Though no formal decision has been made, the EC is believed to have ruled Chinese textiles out of the system, said an official from the Chinese China Chamber of Commerce of Import and Export for Textiles.

"The principle of this GSP reform is that the exclusion of Chinese-made textiles is on top of its agenda," the official said.

The EC decided to reform the present GSP system by providing preferential benefits to countries most in need of the benefits and withdrawing them from the products produced by beneficiaries that are highly competitive on the EU market.

"The Chinese products have been viewed as a challenge and threat to the local textiles industry, and will definitely be kicked out," he said.

European Union Trade Commissioner Pascal Lamy has also made it clear that the preferential tariff for Chinese textiles should be cancelled.

"Does China today need a tariff advantage of 3.5 percent? Very frankly, no!" Lamy was quoted as saying recently.

The coming abolition of textile quotas is another driver behind the lifting of the GSP, said the official.

With the textiles quotas being removed at the end of the year, EU's trade officials expect a surge in shipments from China.

EU officials confirmed that the ending of quotas could not be negotiated. However, they say they believe there should be flexibility in order to help other developing countries. For example, the future GSP regime is one such area where flexibility could prevail in their favour.

The Chinese Government has not made any comment at present since the decision is not formal and the EU has not produced any details about the GSP lifting. Relevant government departments are watching the process closely to assure it is going fairly.

But an official said Chinese exporters should not be too worried about their possible removal from GSP list.

Some producers, who have mostly limited production lines to fit in with the GSP scope, would suffer if their profits were already slim, the official said.

"But according to our experience, most export flows are not hampered by the withdrawing of the tariff preference," he said.

And textile traders should note that, in the long run, the reforms are unlikely to hamper the influx of Chinese-originated goods into the EU.

"The competitive advantage of Chinese textile producers vis-a-vis their EU industry counterparts far outweighs the benefits that may be lost in a reformed GSP scheme," he said.

But he warned Chinese producers should focus efforts on increasing the competitiveness of their products and, in particular, high quality.

It is unavoidable that more and more Chinese exports will graduate from the GSP list.

Six categories of products, including edible products of animal origin, plastics and rubber, paper, optical and clocks, electro-mechanics, and consumer electronics were graduated from the GSP in May.

Compared to GSP, anti-dumping and safeguard measures are more harmful to the textiles industry.

US textile and clothing manufacturers again petitioned the administration of President George W Bush on Wednesday to protect them against a surge of Chinese imports next year when worldwide quotas are removed.

The industry wants the administration to impose limits of 7.5 percent on the growth of Chinese products in 10 categories.

It also asked for safeguard limits that were imposed last year on three other product lines to be extended for another year.

The petitions cover cotton and synthetic trousers, wool trousers, cotton and synthetic knit shirts, cotton sheets, cotton yarn, shirts and underwear.

The US Government will have to make an initial ruling on the technical merits of the petition on November 1, the day before the US election.

(China Daily October 15, 2004)