The European Union (EU) and China have agreed to liberalize their bilateral textile trade in 2008, it was announced Wednesday.

This was one of 12 agreements reached during the trade talks between Chinese Commerce Minister Bo Xilai and EU Trade Commissioner Peter Mandelson on Tuesday, according to a press release issued by Bo's delegation.

"Both sides have agreed to abide by the 2005 Shanghai textile agreement and implement the free textile trade in due time," said the press release.

In June 2005, following the so-called "textile war" between China and the EU, Bo Xilai and Peter Mandelson reached an agreement in Shanghai on resuming quotas on China's textile exports to the EU by 2007.

The press release said the EU and China will continue dialogue and cooperation on textiles, so as to maintain the steady and smooth development of the bilateral textile trade.

Mandelson, for his part, told a press conference on Tuesday that both sides were able to acknowledge and welcome the successful operation of the 2005 Shanghai textiles agreement.

"We were both cognizant of the -- if I can put it this way -- re-entry problems of the return to normal trade, and we agreed that we wanted to avoid any destabilization of the market," he said.

"For our part our automatic licensing system will continue through 2008 so we can continue to monitor market developments and discuss jointly with Chinese authorities any actions that we need to take to ensure a smooth transition from the textiles agreement to normal trading," he added.