China said today it would scrap export tariffs on 81 textile products, making good on its threat to roll back the taxes if Western countries threw up barriers against its goods.
The tit-for-tat move followed a formal request on Friday by the European Union for talks with China over surging shipments of T-shirts and flax yarn, which have fanned fears of widescale bankruptcies and lay-offs in the 25-member bloc.
The EU said it hoped a deal to avoid the imposition of import curbs could be struck during a 15-day consultation period.
However, under the terms of China's accession to the World Trade Organisation in 2001, the act of lodging the request already requires China to limit its exports of those products to a level no greater than 7.5 per cent above the amount that entered the 25-member EU between March 2004 and February 2005.
Washington imposed similar quotas on Chinese-made trousers, underwear, shirts and other goods in mid-May.
The row over textiles has added fuel to a fierce debate over the value of the yuan, which has been pegged near 8.3 per dollar for a decade.
Law-makers and manufacturers in the United States, as well as many independent economists, believe the peg undervalues the currency, giving China's exporters an unfair advantage. To try to head off curbs, China introduced an export tax on 148 products on January 1st, the day a decades-old system of quotas on developing countries' exports of textiles expired.
China's exports boomed nonetheless, angering Washington and some EU countries and prompting Beijing on May 20th to raise taxes on 74 of the targeted products, to reduce tariffs on two lines and to add yarn to the list.
The changes had been due to take effect on Wednesday. However, reversing course, China's finance ministry said that export taxes on 81 items would now be scrapped that day, including the planned levy on yarn.
"The State Council's tax committee decided to further adjust textile export tariffs from June 1," the ministry said in a statement on its web site.