Trade ‘reciprocity’ dominates discreet EU-China talks


National security and trade ‘reciprocity’ concerns – particularly in the ICT sector – were key topics addressed at a high-level EU-China meeting on Thursday (3 May).

China is currently considering a series of lucrative ‘five-year plans’ across a range of sectors, including a build-out of 'smart cities' estimated at €117 billion, of which 60% is expected to benefit telecom firms.

Western ICT companies such as Ericsson, IBM and Cisco have enjoyed early access to China’s markets but their future involvement has been questioned following Chinese demands for "reciprocity" in trade agreements and national security concerns over the country's information infrastructure.

US takes a hawkish line on foreign broadband provision

The US and Australia have taken notably hawkish lines on foreign provision of ICT services such as broadband internet, freezing out overseas companies from their markets on the basis that these may represent a threat to national security.

In March, the European Commission took a similar stance when it tabled a paper that proposed blocking non-EU companies from bidding for government contracts if their home countries do not grant the same access to their own public procurement markets.

European software companies in particular have complained that they are sidelined in bids for government contracts in China, while the European Commission also has concerns about US legislation that favours homegrown firms.

The issue was addressed at two key EU-China dialogues held in Brussels on Thursday (3 May), with both sides making conciliatory noises.

?First, at a behind-closed-doors dialogue between Commission President José Manuel Barroso and Chinese Vice Premier Li Keqiang, Barroso staked out priorities “to achieve a better level playing field in our economic relations”. He emphasised that “European stakeholders should have better opportunities for business and investment in the Chinese market.”

Barroso and Li discussed trade level playing field

The meeting was closely watched by media – despite the absence of an official press conference – since Li is considered likely to succeed Wen Jiabao to the Chinese premiership at a communist party congress scheduled for the autumn.

The failure to hold a formal press briefing was formally condemned by the Association of International Journalists, which claimed that the Commission had relented to pressure from the Chinese on World Press Freedom Day.

In an intervention over lunch, revealed to EURACTIV, Barroso said: “We should advance work towards a bilateral investment agreement, as agreed at the February (EU-China) summit. Chinese investment in Europe and European in China are ever more important.  We must create the right conditions for future development, encourage and increase investment flows and create legal certainty for our investors.”

The conciliatory tone was reflected at a separate conference on EU-China urbanisation partnership, held in Brussels on 3 May, which was directly relevant to Beijing's five-year “smart cities” plan.

Challenged to evaluate the impact potential trade reciprocity measures would have on EU-China trade, the Mayor of Beijing, Guo Jinlong, said:  “We welcome relevant EU businesses to come and to invest in our enterprises in Beijing, we also support our companies exporting their services.”

The phenomenon of trade protectionism has “risen a little bit”, Guo admitted, adding: “We think that this is not conducive to overcome the current financial crisis, we welcome a more open and transparent market environment.”

“The big winners from this investment activity in the next five years will be telecommunications providers and infrastructure suppliers with the best market channels in the Yangtze Delta and Pearl Delta,” said Jerrold Wang and analyst with Lux Research.

“For prospective foreign participants in China’s smart city growth, opportunities still exist,” added Zhuo Zhang, another Lux specialist. “However, care is needed to navigate China’s increasing sensitivity about information security while still leveraging the ability to introduce advanced technologies and systems integration experience.”

“I think network security is the biggest challenge for the industry and for every player: governments, policymakers, vendors and customers,” said Huawei’s Western European chief, Kevin Tao in an interview with EURACTIV.

“However when someone says that for reasons of network security governments can only use one national provider, I believe that is unfair. The internet is global and everyone wants a free borderless electronic on-line world. The problem is that although the internet is borderless, countries and individuals and companies have borders and data protection requirements which have to be respected,” Tao added.

"Today is world press freedom day, but unfortunately for much of the world it is just another day without media freedom or even freedom of speech," the president of the International Press Association or API, in Brussels, Ann Cahill in a statement read yesterday in the EU press room. "A free media, free speech and the accountability of our leaders is part of our democracy. However, we must question this now as once again the EU institutions appear to roll back or hide these fundamental principles in deference to other regimes."

China is the EU's biggest supplier and the EU's second largest and fastest growing export market.

In the course of 2010, China also overtook Germany as the world’s largest exporter, and also became the world’s second largest national economy after the US. China now accounts for 12.4% of world trade in goods.

Investment flows show vast untapped potential. European companies invested €7.13 billion in China in 2010. China invested €736 million in Europe in 2010 (compared to €256 million in Europe in 2009). This is respectively 4.9% and 0.71% of both sides' total investment outflow.

At the EU-China Summit in February 2012, the two sides decided to move towards investment negotiations as soon as possible. China is an increasingly significant outgoing investor (10% of global investments today, expected to increase to 20% over the next 10 years).

Negotiations between the EU and China on market access are also ongoing.

  • 2012: Trade talks between EU and China ongoing.

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