PricewaterhouseCoopers international trade consultant Emma Ormond believes that quotas on imports of garments from China are very unlikely to be extended at the end of the year but the threat of other measures hangs heavy.

Current quotas have restricted the volume of clothing which China can export to the EU since June 2005, when the term ’bra wars’ was coined, as huge amounts of clothing were stockpiled in ports and warehouses causing a supply-chain headache for UK retailers.

Peter Mandelson, the EU Trade Commissioner, has held a number of meetings in recent weeks regarding the expiry of Chinese textile quotas on 31 December 2007. Although it is early to say, it looks increasingly unlikely that the current quotas will be extended. The Commission still has little appetite for an extension and, even if it did, agreement would be needed from the Chinese, which is unlikely.

Our understanding is that France has been most vocal in calling for the extension of quotas. Interestingly, a number of the more protectionist member states are thought to have given up calling for an extension, on the grounds that it is a lost cause. However, that has not stopped them piling pressure on the Commission to try to ensure orderly trade when the quotas expire and, to that end, the Commission will introduce a system of monitoring imports from January 2008. The Commission has said that it will give advance notice of the monitoring system and we should have more detail by September.

So what does this all mean going forward? Spring/Summer ’08 merchandise shipped in 2007 will still be subject to quota but anything held back until January will not and there is virtually no likelihood of measures in the first half of next year. However, things are a little less certain for Autumn/Winter ’08, as it is very likely that the EU industry will call for other trade defence measures, such as anti-dumping duty (which was imposed on leather footwear from China and Vietnam last year). If an anti-dumping investigation was launched later this year or early next, provisional measures could enter force in the second half of next year.

Emma Ormond commented "Although it’s early days it seems extremely unlikely that quotas on imports of garments from China will be extended at the end of the year. Clearly, there will be a surge of imports in early 2008 but, in our view, it is unlikely to be as extreme as the ’bra wars’ scenario in 2005, as costs are higher in China now and many of the importers that were caught out in 2005 have found other sources.

"Just the threat of measures after the expiration of quotas can be extremely disruptive and the concern is that the rumour mill will work overtime generating information that will be impossible to confirm or deny. There is a possibility that certain product categories could be subject to a form of trade defence instrument. It still seems crazy that, after 13 years in which to prepare for the end of quota, the EU industry should still believe itself justified in seeking protection."