EU and China agree textile pact
The European Union and China have agreed a deal to limit exports of Chinese textiles into Europe after last-ditch talks to calm a trade row.
EU Trade Commissioner Peter Mandelson said the curbs would give European firms time to adjust to China's growing power in the textile trade.
The measures will come into force immediately and last till 2008.
The EU was set to impose its own curbs if no deal was reached on Friday, as trade rules allow protection till 2008.
Mr Mandelson said "the overall settlement offers a fair deal for China while giving respite and much-needed breathing space to textiles industries in Europe and developing countries".
He and China's Commerce Minister Bo Xilai spent Friday locked in detailed negotiations in Shanghai.
End of an agreement
The EU fears Chinese products could overwhelm Europe's textile producers, while China had said the EU was acting unfairly.
The US has levelled similar complaints about Chinese textiles and has already re-imposed caps on seven products.
The explosion in China's textile trade has followed the scrapping of the global Multi Fibre Agreement on 31 December 2004.
Since then, both the EU and US say that textile exports have soared.
As he arrived in Shanghai, Mr Mandelson told reporters that he looked forward to reaching a last-minute deal - but would not shrink from taking action.
"If we don't make an agreement, we will have to take other measures. This question has been dragged on over many days. We have a limited opportunity."
The agreement comes as China on Friday reported its biggest monthly trade surplus so far this year.
Chinese exports in May rose 30% from the year before, with the trade surplus - the difference between exports and imports - doubling from April to $8.99bn, far above most predictions.
Also on Thursday, shoes came under scrutiny after the EU said shoe imports from China had leapt 700% since the start of the year.
The EU wanted China to agree to limit export growth to 7.5% on T-shirts and flax yarn - or face imposed quotas, perhaps within days.
An investigation into imports in seven other categories is still under way.
The EU position rests on China's agreement when it joined the World Trade Organization in 2001 to allow other members to curb its clothing exports if their markets were disrupted.
China says that Europe and the US need to provide better evidence before moving ahead with sanctions, and warns that as many as 400,000 workers could be affected.
Mr Bo has warned that it may delay opening up its markets to agricultural products.
On Thursday, he said that China saw the textile row as a test of whether developed countries were serious about fairness in enforcing free trade rules.
"China will protect its industry's legitimate rights, and on the other hand will act in line with WTO regulations," he told reporters.
The US, meanwhile, held its own abortive talks in Beijing earlier this month.
Story from BBC NEWS:
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EU and China agree textile pact
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