Recently in response to a dispute with both the United States the European Union's possible action toward imposing tariffs on cheap textile products from China, China took countermeasures to exclude those products from the existing export tariffs to ward off damages to its economy. To resolve the issue, in June 2005, the EU signed an agreement with China imposing new quotas on 10 categories of textile goods, limiting growth in those categories to between 8 percent and 12.5 percent a year. The agreement was in hope of providing the EU's domestic manufacturers time to adjust to a world of unfettered competition. But for most retailers in Europe, which had already placed orders for mountains of new goods from China, it turned out to be a disaster as tens of millions of garments piled up in warehouses and customs checkpoints, when Chinese textile manufacturers exceeded their quotas right after the restriction. As a matter of fact, less than a month after the agreement, men's trousers hit their import quota, followed rapidly by blouses, then bras, T-shirts, and flax yarn. It is estimated that France lost about a third of its jobs in the sector.

Nevertheless, it is not clear as to how the quota on Chinese goods would help domestic producers, especially when there are so many low-cost firms in low-wage countries like Bangladesh and Costa Rica waiting to take up any Chinese slack. According to an EU official, the action against China was designed to help workers in those very countries in that “The EU also considered the effect the Chinese market share was having on other developing countries that have historically been dependent on our market. Who will protect jobs in Tunisia and Morocco?” Do you think the EU textile war with China will eventually save its domestic businesses? Should the United States follow the EU in imposing a textile quota on Chinese imports to protect domestic businesses? Why or why not?