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The three-year agreement signed by China and the United States in London on Tuesday should ensure a stable trade environment for Chinese textile exporters and American retailers.
This deal born of compromises may have more significance than its face value as a stopgap solution to the bilateral textile dispute indicates.
By allowing the United States to step back to reimpose quotas on Chinese textile products, the new pact has aroused suspicions among proponents of free trade about what will happen next.
In a few weeks, ministers from the 148 countries in the World Trade Organization are to meet in Hong Kong where they will try again to save the Doha Development Agenda. The Doha round of trade talks, which began in 2001 and is supposed to be completed by the end of next year, is not only an effort to boost growth in poor countries through fair trade but also a stepping stone for the global trading body in the coming decades.
At the moment, any backpeddling against the principle of free trade that can poison the cooperative atmosphere needed to advance the critical round of WTO trade talks is surely the last thing the international community wants to see.
Hence, where the world's No 1 trade power stands in terms of balancing global free trade and domestic protectionism is a matter of great concern to many countries.
In particular, how the United States, the largest developed economy, responds to the growing trade power of China, the largest developing country, has huge implications for WTO negotiators from rich nations as well as poor countries.
Some may doubt whether the new trade agreement is a win-win deal for Chinese enterprises that will have to scale down production due to new quotas. But at least it is not a loss-loss deal, as some think. Actually, it may be a blessing in disguise for bilateral and even global trade.
Apparently, reimposing quotas on Chinese textile exports represents a mirror image of global efforts to dismantle trade barriers.
The decade-old global quotas on the textile trade expired at the beginning of this year. By quantitatively limiting developing countries' exports, rich countries made use of the outmoded quotas to protect their domestic textile manufacturers.
The United States' attempts to prolong protection cannot save domestic enterprises with decreasing competitiveness, but will cause international scepticism about its commitment to free trade.
But look again. The new trade agreement reached by China and the United States after seven rounds of tough talks also bears witness to a much needed spirit of pragmatism. In short, it is letting common interests prevail.
Both sides have their own reasons to insist on their original stances.
As a populous developing country, China deserves its increasing share of a quota-free global textile market. The impact of reimposed quotas on its 20 million textile workers warrants the country's opposition to such trade barriers.
US negotiators have to consider both domestic textile manufacturers that cry loudly and politicians who drive a hard bargain.
But the signing of the agreement shows the common interest of sound trade relations on which the nations agree far outweighs their differences.
With a sound trade environment, the reimposed quotas will encourage Chinese textile exporters to shift their focus from undercutting each other to improving quality. Meanwhile, increased growth margins for imports of Chinese products will force US textile enterprises to undertake necessary restructuring instead of relying on protective measures.
In a broad sense, the hard-won trade pact will enhance confidence among businesses from both countries in their governments' determination and capability to solve tough trade matters through negotiations.
(China Daily November 10, 2005)
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