China revokes increase in textile export tariffs in trade dispute

BEIJING -- China on Monday scrapped concessions meant to avert a trade war with the United States and Europe, withdrawing a plan to sharply increase export duties on Chinese-made textiles that are flooding foreign markets.

The turnaround followed new import controls imposed by Washington and the European Union, which China's commerce minister on Monday called a violation of World Trade Organization rules.

He said Beijing would "firmly protect" its legal rights, though he didn't say what steps his government would take.

The announcement of plans to scrap the tariffs -- which came ahead of a visit this week by U.S. Commerce Secretary Carlos Gutierrez -- cited the U.S. and European steps to restrict imports of Chinese clothing and textiles.

Chinese producers shouldn't face "double pressure," Commerce Minister Bo Xilai said at a news conference.

The European Union said Monday it was "surprised" by China's decision to cancel its export taxes but appealed to Beijing to continue talks.

Beijing had announced last week that it would quintuple export tariffs on 74 types of goods on June 1, trying to persuade its trading partners not to restrict textile imports that have soared since a global quota system expired on Jan. 1.

The government didn't give a reason for revoking the increases but cited U.S. and European steps to restrict imports of Chinese clothing and textiles -- measures that Beijing has criticized as unfair.

The official Xinhua News Agency said the decision was made "in the wake of the European Union's decision to impose quotas on imports of Chinese textiles, as well as the United States' decision to re-impose restrictions on seven kinds of Chinese textile and clothing imports recently."

The United States and European Union cited terms of China's WTO membership agreement that let its trading partners restrict imports that are disrupting their markets.

But Bo accused Washington and the EU of violating WTO rules by failing to provide adequate evidence of market disruption. He said they used data from two short a period and made an "easy decision" to impose quotas.

"In our opinion, this move lacks legal grounding and therefore is incorrect," Bo said.

"The United States and European Union have not provided adequate data. ... That is unreasonable and unscientific."

The United States says imports of Chinese clothing and other textile goods are 54 percent above last year's level. The EU says imports of Chinese-made T-shirts rose by 187 percent in the first four months of this year, while flax yarn imports rose by 56 percent.

The EU took the dispute to the WTO on Friday, giving China 15 days to react. It means the EU will be allowed to restrict the growth of imports of flax yarn and T-shirts to an annual rate of 7.5 percent.

Washington earlier imposed controls restricting growth of imports of Chinese-made cotton pants, underwear, synthetic fiber shirts and other goods to an annual rate of 7.5 percent.

Already on Friday, the Chinese government reacted to U.S. import quotas by saying the new export tariffs wouldn't apply to goods already affected by foreign controls.

Bo complained that the foreign quotas were damaging a Chinese industry that employs 19 million workers, many of them poor.

Bo said the United States and European Union were partly to blame for the jump in Chinese textile imports because they failed to carry out earlier promises to lower market barriers, leading to a shock when a global quota system expired on Jan. 1.

"The fundamental, true reason for this is that the United States and the European Union could not faithfully and honestly implement their obligations," he said.