CHINA denounced a move by the United States (US) to cap selected textile imports yesterday and scrapped missions to buy American farm goods, saying the US measure sullied the spirit of free trade.

China postponed indefinitely a plan to send a delegation to buy US cotton and wheat, an industry source in Hong Kong told Reuters, news that followed cancellation of a separate trip to buy soybeans.

The cancellations were blamed on visa and logistical problems but raised fears they were retaliation for the US quotas on imports of some Chinese textiles.

The Bush administration said on Tuesday it would slap import quotas on Chinese knit fabrics, ?bas and robes?, signalling a new line of attack against the world?s fifth-largest trading nation. Some US officials have blamed job losses on the rapid rise of Chinese textile imports.

?The Chinese government expresses deep regret and firmly opposes this decision,? Commerce Ministry spokesman Chong Quan said in a statement. It ?runs against World Trade Organisation principles on free trade, transparency and non-discrimination?, Chong said, adding that China may take the dispute to the World Trade Organisation (WTO).

The US measure concerns less than five percent of China?s textile exports to the United States and will not take effect before three months.

US National Security Council spokesman, Sean McCormack, told reporters in London the administration was committed to free trade and that the textile move was ?consistent with our commitment to ensure that US companies have time to adjust to market disruptions caused by rising imports?.

Temporary speedbumbs

Deputy US Trade Representative, Josette Shiner, said the safeguards were included as part of China?s WTO entry package as a way to temporarily slow the pace of fast-growing imports. ?They were designed as some temporary speedbumps if we saw a surge in certain import areas,? she told reporters in Beijing.

Chinese officials had made clear they would have preferred Washington not invoke the safeguards but had not indicated what their response would be, Shiner said.

The quotas would cap the rise in Chinese textile shipments at 7.5 percent above the total for the last year or so, and would be in place for a year.

The move stoked fears Washington may be shifting to more protectionist policies, helping push the dollar to record lows against the euro overnight.

US manufacturers say China has pumped up its trade surplus with the United States by keeping the exchange rate of its yuan currency unfairly low, giving its goods an edge in world markets.

The United States estimates its deficit with China will rise about 20 percent this year to $120 billion, a hot political issue in the run-up to the 2004 presidential elections.

?We expect the Bush administration to take further steps to restrict imports of Chinese textile products, which is likely to lead to flare-ups in trade conflicts between China and the United States,? said Guo Changsheng, textile analyst at China Southern Securities.

China had been scheduled to send several groups to the United States over the next few weeks as part of a multi-billion dollar shopping spree aimed at showing it was serious about narrowing the trade gap.

Chinese call for action

A Commerce Ministry spokesman said one purchasing delegation had been delayed due to ?itinerary problems? but declined to say what the group had intended to buy.

Some Chinese business groups called for retaliation. ?I think we should react somehow and call on the government to do something,? said Shi Jianwei, executive vice-president of the China Cotton Association and head of the China Cotton and Jute Bureau.

Reached again later, Shi said he had not heard the cotton trip had been cancelled, but added he felt the delegation should still go for talks even if it did not buy any cotton.

China?s Chamber of Commerce for Import and Export of Textiles said in a statement that the move would ?ruin the fundamental interest of Chinese textile exporters? and hurt American consumers.

The chamber also said China?s imports of US fabric and raw material had skyrocketed this year, jumping nearly 150 percent year on year to hit nearly $790 million in the first nine months.

The American textile industry, which said it has lost more than 316,000 jobs since the start of 2001, praised the US decision but said it should merely be a first step to putting a lid on virtually all Chinese textile imports. ($1 = 8.276 yuan).

(Additional reporting by Tamora Vidaillet, Judy Hua and Zhou Xiqin in Beijing, Nao Nakanishi in Hong Kong, Richard Cowan in Washington and K.T. Arasu in Chicago).

Scott Hillis