European Union (EU) trade chief Peter Mandelson said Tuesday a negotiated settlement to the textile standoff with China could be found despite China’s decision to scrap export tariffs on textile goods.    

“We’re finding a way forward with the Chinese,” Mandelson said. “It’s work in progress. What I am looking for on textiles is an overall negotiated settlement between us.”    

He said such a deal would cut imports and give “sufficient breathing space” for Europe’s embattled textile industry to restructure. The industry was currently struggling with a “sharp surge” in cheaper Chinese imports, Mandelson said.    

The EU said it was surprised by China’s decision to scrap concessions meant to avert a trade war.    

The bloc called for formal consultations under world trade rules last Friday. Talks under World Organization (WTO) rules will force China to curb shipments of two sensitive trade categories — T-shirts and flax yarn.    

China edged closer to a trade war with the EU and United States this week after scrapping export tariffs on a range of textile products. They came into effect Wednesday and were in response to restrictive measures taken by Washington and Brussels.    

China has less than two weeks to prove it is trying to slow its exports. If it fails, the EU can impose restrictions in the rise in T-shirt and flax yarn imports to 7.5 percent until the end of the year.    

The United States and European Union must adopt a more flexible attitude if progress was to be made in their dispute with China over textile exports, domestic media said ahead of a visit by US trade officials.    

The China Daily said much was at stake and concessions must be made. “As in most trade disputes, unilateral action is not constructive. Trade wars benefit no one,” the newspaper said.    

“The United States and EU should lessen their demands to keep the ball rolling.”    

The comments came ahead of a visit to Beijing on Thursday by U.S. Commerce Secretary Carlos Gutierrez for talks with his counterpart Bo Xilai.    

US Trade Representative Rob Portman arrives Saturday for discussions with Vice Premier Wu Yi.    

Negotiations will center on the alleged flood of cheap Chinese textiles exports swamping U.S. markets since the end of the global quota system Jan. 1.    

“Parties involved in the textile trade dispute should also be aware that the outcome of the talks will have repercussions for the development of global free trade,” said the newspaper.    

“Failed China-US, China-EU talks will only add to people’s suspicion over Western dedication to free trade.”    

China has argued that attempts by the EU and Unite States to impose limits on textiles undercut the very principles of free trade they are promoting.    

It also says they have only themselves to blame for their current predicament, in which jobs are threatened by the influx of Chinese goods.    

“Their underlying goal is to find an excuse for restrictive measures to answer calls from their domestic textile associations,” said the editorial.