China warned over widening trade gap

Meeting with his Chinese counterpart, EU Trade Commissioner Peter Mandelson warned that China could face retaliation unless it removes “indefensible” trade barriers that are partly to blame for Europe’s ballooning trade deficit with the Asian giant.

Commissioner Mandelson met on 12 June with his Chinese counterpart Bo Xilai amid rising anxiety over China’s ever-increasing trade surplus with the EU, which hit €168 billion in 2006 and widens by around €350 million each day, according to the Commission. 

No agreements were reached during the meeting, but Mandelson said that the Chinese minister recognised that “something must be done” to address the growing gap and that the two sides had agreed to present “realistic, practical proposals” to address trade barriers limiting access to the enormous Chinese market at an EU-China summit in November. 

While Mandelson stressed his preference for “constructive dialogue”, he warned that Europe could be forced to act if there is no improvement in the relationship. 

“This is the most sensitive and challenging trade relationship that the European Union has. It is also the most promising and the most important to get right,” he said, but added: “If European public and political opinion is not satisfied that the Chinese authorities are making all the necessary changes and putting aside what we regard as unnecessary obstacles and barriers to our market access, then impatience and anger is going to rise and pressure is going to come on us in the Commission to start limiting in different ways the access that Chinese producers and exporters have to our market.” 

According to Commission estimates, €20 billion in trade opportunities are lost every year to EU business because of market access barriers in China. Furthermore, EU manufacturers operating in China are thought to lose around 20% of their revenue due to intellectual property rights infringements in the country. 

The EU has decided not to join a US case at the WTO to address rampant piracy and counterfeiting in China, but Mandelson warned that China would have to get into the habit of prosecuting criminals, and accused the government of letting things get out of hand by allowing “the continued operation of very large fake and counterfeit markets without, apparently, attracting any meaningful intervention from the Chinese government”. 

The two sides also discussed China’s growing steel production, which the Commissioner said bore the threat of “considerable price distortions” and of Chinese steel being dumped on European markets, adding that he did not rule out taking protection measures if talks failed. 

In a separate press conference, Bo Xilai pledged to try to boost imports from Europe, citing recent deals to buy Airbus aircrafts and nuclear power technology from the bloc, according to the Financial Times. However, he said he thought the current trading relationship was “complementary and balanced” and accused Mandelson of “extremist language”, stressing that China has already taken “huge steps” to curtail piracy. 

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