EU, China to step up work on trade tensions

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A new ‘High Level Economic and Trade Dialogue Mechanism’ was launched in Beijing on 25 April, with the key aim of addressing the EU’s ballooning trade deficit with China.

Leading an impressive group of nine commissioners to China from 23-25 April, Commission President José Manuel Barroso said that “useful” progress had been made in key areas of cooperation such as trade and climate change, although he stressed that more needs to be done. 

The aim of the visit was to defuse tensions fed by the bloc’s soaring trade deficit with China, a growing number of trade spats and, more recently, charges of human-rights violations following China’s repression of Tibetan protesters. 

The two sides also discussed investment, technological cooperation, consumer protection and product safety, energy and intellectual property rights. 

Re-balancing trade and investment 

“Bilateral trade volumes are impressive and are increasing every year by 20-25%. But there are major imbalances and we both agree on the necessity to rebalance our bilateral trade,” said President Barroso. 

Indeed, the country’s trade surplus with the EU is growing at an average of €15 million per hour, rising from €128 billion in 2006 to roughly €160 billion in 2007. Furthermore, while Chinese investments in Europe rose by 26% in 2006 to reach €2.13 billion, EU investments in China fell by 37% over the same period, due to Chinese limitations on foreign investments. 

The meeting marked the launch of a new “EU-China High Level Economic and Trade Dialogue Mechanism”, aimed at restoring the balance in trade and investment relations, notably by ensuring more effective market access and better protection of intellectual property rights. 

Similar to the EU-US Transatlantic Economic Council, the new initiative is designed to speed up the removal of trade irritants and regulatory barriers confronting European companies trying to establish themselves in China by “delivering regular and concrete results” (EURACTIV 07/05/07). 

However, no specific measures have been announced as yet and the EU’s Trade Commissioner Peter Mandelson noted that in the meantime, the EU would continue to “reserve the right to take appropriate measures to combat unfair trade, to combat dumping, to combat state distortions where these have an impact on trade”. 

Cooperating on illegal trade 

A major sticking point in bilateral trade relations is China’s rising production of fake products, ranging from pirated DVDs to counterfeit toys and car parts or unauthorised medicines. According to the EU, about 80% of fake goods on the world market originate in China, and measures are needed to “combat the flood of fake goods and counterfeits which come toward Europe,” said Mandelson. 

He nevertheless underlined that China has stepped up its fight against piracy, saying since he became trade commissioner in 2004, “the country has moved from a state of denial to a state of national mobilisation”. 

Both sides endorsed the signing of a Joint Customs Action Plan on IPR, aimed at enhancing custom cooperation on seizures of counterfeit goods and implementing concrete measures to reduce counterfeit sales, at the next EU-China Summit. 

Climate and energy 

According to Barroso, China is now ready to work with the EU to move negotiations on a global climate pact forward. “We welcome indications of Chinese readiness to include its domestic emission reduction policies in an international agreement, provided that developed countries commit to mid-term reduction targets for 2020 and that an effective financial mechanism is put in place to promote technology transfer,” he said. 

He also said the two sides had agreed to establish, by the end of the year, a bilateral cooperation mechanism in order to combat illegal logging and announced that a new €15 million EU-China Environmental Governance Programme will be launched at the next EU-China summit. 

The two sides further underlined the need to cooperate on standards in order to facilitate technology transfer, particularly in the areas of energy and sustainable development. A key concern for the EU will be to address certain local requirements in the Chinese power generation and transmission sectors, which currently restrict greater EU involvement in the Chinese energy sector. 

"I can honestly say that today's discussions were more rigorous, more realistic and showed a greater depth of understanding and commitment than any set of discussions I've had previously on visits to Beijing," said EU Trade Commissioner Peter Mandelson following the meeting. 

According to Chinese Prime Minister Wen Jiabao, the new High-Level Economic and Trade Dialogue Mechanism "will become another key platform to enhance mutual trust".

In October 2006, the Commission set out its strategy towards China in the Communication 'EU-China: Closer partners, growing responsibilities'. The communication takes stock of EU-China relations in the context of the country's re-emergence as a global economic and political power. 

It signals the EU's wish to continue and further intensify its comprehensive engagement with China. But also stresses that the country's stronger influence and position in the world goes hand in hand with increased responsibilities and expectations. 

Released the same day as the communication, the working paper on EU-China trade and investment, entitled 'Competition and Partnership', further elaborates policy options to ensure "balanced, reciprocal and mutually beneficial" trade relations. The emphasis is on the benefits of openness, competition and market access. 

  • Autumn 2008: EU-China Summit.

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