31 August 2005

The Web

‘Made in China’ clothes blocked by Maltese customs

• More than 438,000 jerseys, trousers and blouses stopped

James Debono

Thousands of clothing items imported from China are piling in boxes at the Maltese customs pending the outcome of EU negotiations with China over import quotas for cheap Chinese clothes.
The 32,099 jerseys, 5,020 trousers and 1,386 blouses stopped by Maltese customs officials have suffered the same fate as 50 million sweaters and 17 million pairs of trousers and an unidentified quantity of bras detained at European ports.
No import licences can be issued for these categories because quotas set for this year by the European Union for imports from China have been exceeded.
While quotas protect European manufacturing firms from the cheap Chinese onslaught, retailers across Europe are fuming at what they see as an attempt to restrict the market.
GRTU Director General Vince Farrugia insisted that import quotas imposed by the EU may have an inflationary impact in Malta since cheap Chinese clothes will be replaced by more expensive imports.
China can afford to produce textiles at the lowest cost possible because of lower labour costs and poor employment standards.
To protect its industries from competition, the European Commission has imposed quotas on the imports of textiles from China.
But demand for cheaper Chinese garments has proved insatiable and quotas set for 2005 have already been exceeded.
The European Commission has poured scorn on retailers' fears of clothing shortages in winter, as member states await details of an EU proposal to free up Chinese goods stuck in European ports.
“Scare stories of clothing shortages comparable to World War II are not remotely justified,” trade commissioner Peter Mandelson said on Monday, blaming the media for creating “the idea of shelves being empty.”
But Mandelson has vowed to do everything in his power to end the deadlock, auguring that the goods "stranded" at European ports could be released by the middle of September.
Peter Mandelson has until now refused to give details about how he planned to clear the backlog of Chinese goods such as trousers and bras.
Experts believe he could put forward two solutions – one would allow China to bring forward some of its 2006 quota allowance to this year.
The other involves raising overall quota limits - but that is likely to be opposed by EU members with large textile industries like Italy.
But retailers in Europe are up in arms against the EU’s protectionist policies.
The EU's retailers representative, Xavier Durieu, accused Mandelson of doing too little too late and condemned EU blocks on Chinese goods - adding the move was penalising retailers.
His colleague in Malta, Vince Farrugia, Director General of the Chamber of Small and Medium Size Enterprises-GRTU also scorns the EU’s protectionist policies.
He also states that Malta stands to benefit from an open market in textiles.
The importation of cheap Chinese textiles has a restraining impact on inflation, says Farrugia.
On the other hand quotas limit the choice for small traders and consumers alike.
The Maltese spend more on clothing than on transport, communications, and housing and personal health care.
Expenditure on clothing amounts to 8.24 per cent of the average consumer expenditure.
Therefore any increase in textile prices due to a decrease in availability of cheaper Chinese textiles could have an impact on the retail price index.
General imports from China in 2004 amounted to Lm10.8 million while exports amounted to only Lm2.8 million.
Yet Malta imports less from China than from other Asian countries like Japan and Singapore.
Another country with which Malta has an unfavourable trade balance is Egypt.
In 2004 Malta imported Lm28.2 million from this North African State while only exporting Lm1.8 million. In 2003 imports from this North African country were substantially lower.
But the flooding of Europe with Chinese textiles is set to have a negative impact on North African countries like Egypt with lower costs than those in Europe but still higher than Chinese textiles.
According to news analyst Thomas Fuller of the International Herald Tribune, rather than posing a threat to European jobs, Chinese exports are mostly harming European owned companies producing textiles in North Africa and Turkey.
But are Chinese imports denting what remains of the export oriented Maltese textile industry?
In spite of the contraction of the Maltese textile industry, in 2004 Malta exported Lm7 million worth of knitted clothing and Lm17 million worth of woven clothing.
While recognising that local industry might benefit from EU protectionist policies, Vince Farrugia argues that any positive impact on the manufacturing sector is off set by rising inflation and the impact on the retail sector.
But Chinese imports are not directly affecting Maltese textile operators, says Federation of Industry spokesperson Wilfred Kennely.
While Chinese textile imports are mostly composed of cheap items like sweaters, t shirts and underwear, Maltese textile operators are specialising in the manufacture of more elaborate textile items like suites.
“So far these sectors have not been affected by Chinese competition,” says Kennely.
Yet nobody can feel safe from the claws of the Chinese dragon as long as it is not restrained by universal labour rules and standards.



The Malta Financial & Business Times is published weekly on Wednesdays.
Website is updated weekly on Thursdays at 15.00CET
Copyright © Newsworks Ltd., Malta
Editor: Kurt Sansone
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
Tel: (356) 2138 2741 | Fax: (356) 2138 5075 | E-mail