The EU - China deal that achieved last week to limit the growth of Chinese textile imports to the EU until 2008 is significant in many of ways. Both the parties are content with the agreement that covers 10 categories out of 35 product categories which were liberalized on January 1, 2005. As inked, Chinese export growth would be limited in the range of 8 - 12.5 percent on a programmed format and it is described as fair and reasonable growth for Chinese exports. One of the important out come of this agreement is that both the large trading partners have been able to avoid a possible trade war in an uncomplicated way, simultaneously, EU ensured a period of adjustment for its textile industry, which has eliminated sudden market disruption while preserved the prize of market liberalization for China.
However, in categories not covered by the agreement, and for 2008, the EU could undertake to exercise restraint in the application of its rights under Article 242 of China’s Protocol
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| of Accession to the WTO. Also, other textile rich developing nations and Mediterranean neighbors, who are exporting to EU, now have a fair chance to market their products in the lucrative market. On the other hand, this agreement could also provide good ground to resolve the dispute between US and China as well.
For the importers and buying houses, that were working to reduce the number of sourcing points in China, now have to re-think, since there would be limited quotas available on the restricted product categories. This might result in marginal increase in product prices, which will have to be borne by the final consumers. At the same time, EUropean buyers have to explore more alternative sources in other countries for their merchandise which would be a temporary relief to stiff competition to the suppliers outside China.
EU possibly have made a wise move to restrict the Chinese export and protect its textile industry which has large capability of innovation and adjust to the changed market conditions once protected from sudden market disruption. 
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