China and the European Union reached a deal yesterday to release millions of Chinese garments blocked by EU customs officers because they exceed import ceilings, clearing up a mess that was souring two-way ties.
The search for a solution to release the 88 million sweaters, t-shirts, bras and other items had split the 25-member EU, embarrassed the EU's executive Commission and distracted diplomats from a China-EU summit taking place in Beijing.
"I hope... European member states will feel that this is a sensible, reasonable, burden-sharing arrangement that we need to introduce," EU Trade Commissioner Peter Mandelson said after clinking champagne glasses with Chinese counterpart Bo Xilai.
Mr Mandelson said both sides would share the burden of the extra imports this year, with Beijing agreeing to count roughly half of the blocked goods as part of its 2006 EU export quota.
"I can assure you the result is fair and equitable," Chinese Premier Wen Jiabao said. "It is acceptable to both sides and conducive to both the business communities and the consumers," he told a news conference after the brief summit.
Beijing clearly viewed the agreement as setting the tone for a similar one with the United States, which has slapped emergency curbs on a number of Chinese-made garments.
"Quite soon we should get a deal with the US as well," Mr Bo told reporters.
Mr Mandelson and Mr Bo described each other as tough negotiators. "He and I have crossed some rough seas in recent months, in particular on textiles. One of us has been steering the rudder while the other has been hoisting the sail," Mr Mandelson said.
"I think that we have managed to reach calmer waters. At least I hope so."
At stake in the marathon talks was how to revise a June 10 pact that allowed growth of 8-12.5 per cent a year in 10 categories of Chinese exports to the EU between this year and 2007.
Those quotas were quickly filled as buyers and sellers rushed to get in under the wire.
As of yesterday, 47 million pullovers, 18 million pairs of trousers and 12 million bras had piled up at EU ports.
Under the revised agreement, China accepted restricting annual growth of pullover exports to the EU next year to five per cent compared with 10 per cent as foreseen in the June accord, Simon Fraser, head of Mr Mandelson's Cabinet, said in Brussels.
Growth of trousers and bras would be trimmed to just over seven per cent from 10 per cent, he said.
Some of the 2005 extra imports would also be compensated for by cutting this year's quota for other Chinese textile goods.
EU member states were due to discuss the proposal yesterday and again today when, in the case of an agreement, the goods would begin to be released, the official said.
"This means retailers can get the stuff onto shelves soon, if everyone votes the right way tomorrow," said Alisdair Gray, director of the British Retail Consortium.
But Francesco Marchi, director of economic affairs at Euratex which represents Europe's textile sector, criticised the agreement as "a gift" to China.
Countries with big retail sectors, such as the Nordic states and Germany, had demanded the swift release of the goods. But EU member states with large textile industries of their own, like France, Italy and Spain, clamoured for cuts in Beijing's import quotas in return for releasing the impounded goods.
Mr Mandelson expressed confidence yesterday's agreement would be accepted by member states. "I hope and expect they will."