The European Union (EU) and China have set up a high-level policy forum to discuss trade in textiles and apparel in the lead-up to WTO quota elimination in 2005.

The forum, launched by EU trade commissioner Pascal Lamy and Chinese trade minister Bo Xilai, was set up as part of Chinese Premier Wen Jiabao's visit to the European Commission.

It is intended to pre-empt potential conflicts and ensure a smooth transition to a quota-free textiles trade.

"Setting up a dialogue over trade issues shows how the EU and China can use cooperation and discussion to deal with issues of common interest, sometimes difficult, for the benefit of both sides," Lamy said at the launch.

In addition to the government-to-government dialogue, an EU-China business forum is also being set up.