EU-China Trade Row Flares Up

♠ Posted by Emmanuel in ,, at 10/20/2007 05:09:00 PM
Trade relations between the EU and China are quickly degenerating along the same lines as the US-China row. I previously suggested that the EU was preparing for a fight with China over trade. Well, it now seems that the fight has already begun. Let's begin with China and its sundry trade partners recently engaging in a "bitter exchange" at the WTO:
China squared off against the United States, the European Union and Japan in "a bitter exchange" during a World Trade Organisation (WTO) review of its policies, diplomats said on Monday.

They said tensions flared when China provided only limited answers to developed powers' questions about its export quotas on raw materials, tariffs on photography products, and ownership limits in industries including autos, steel, chemicals, energy, cosmetics, pharmaceuticals and wood products.

As part of its deal to join the WTO in 2001, China agreed to be subjected to a "transitional review" of its trade policies for eight years, followed by a final assessment in 2011 or earlier. Other new WTO members do not undergo similar reviews.

In the latest annual review, as in previous years, diplomats said China argued that the WTO's Market Access Committee was an inappropriate venue for the questions raised and said many of the issues were unrelated to its WTO commitments.

It refused to provide full answers in writing but provided some information in remarks to the committee meeting.

The acrimony added more fuel to escalating disputes between Beijing and its Western trading partners over its economic policies.

Yikes! I would love to see the transitional review on China when it comes out. It should make for--how do I put it--lively reading. After the brouhaha at the WTO, European Commissioner for Trade Peter Mandelson, who is widely considered a free trade advocate, appeared fed up. Mandelson is now calling for strong measures against China for the latter's inaction. Just as with the US, the match is now in progress: Ladeez and gentlemen, in the Red(s) corner, weighing in at $969B worth of exports...
EU trade commissioner Peter Mandelson has lambasted China's trade policy towards the European Union, demanding that the country opens itself up for European goods and services or risk facing a protectionist backlash.

In a private letter sent to European Commission president Jose Manuel Barroso - and seen by the BBC - Mr Mandelson called the trade relationship between the two economies "deeply unequal".
He wrote that while the EU has become the largest export market for Chinese manufactured goods, the EU still sells more goods to Switzerland than to the Asian giant.

According to the commissioner, trade is obstructed by tariffs, state subsidies and intellectual property rights not being enforced - something that results in widespread counterfeiting.

He added that this situation is costing European firms billions of euro each year and is causing a huge and growing trade deficit with China, referring to it as a "policy time bomb".

Mr Mandelson went so far as to call China a "juggernaut" that is "to some extent, out of control" and is "procedurally obstructive" wherever dialogue has been set up.

"The Chinese must recognize the political realities and play their part in providing reciprocal openness for European investment and trade," a commission trade spokesperson said on Thursday (18 October) when asked about the letter.

"It's clear we had some success with the Chinese in terms of specific policy areas, but it's also true that the process has been frustratingly slow," he added.

The spokesperson also stressed that if China did not make significant progress on issues such as intellectual property and opening up on services, protectionist measures could be taken.

"If China does not pull its weight, then inevitably we will be faced with calls for a different approach. Maintaining open trade in both directions is the best solution for both sides. This remains our objective if China is committed to practical measures," he said.

"That different approach would clearly be a more protectionist approach. This is not in Mr Mandelson's view an approach that is desirable or appropriate," he added.

Mr Mandelson now wants to turn to the WTO and use its dispute settlement procedure more often, in particular to tackle the problem of dumping goods on European markets. [Just what the world needs--more WTO cases vs. China.]

Since 2001, the EU has only launched this procedure once against China, while the US has done so six times in the same period.

If the procedure finds China guilty of non-compliance with WTO rules, but fails to resolve the quarrel, the EU is allowed under these rules to retaliate with economic sanctions.

The trade commissioner's letter reflects the EU's new and tougher stance towards China, following the demand for a stronger Chinese currency and the extension of the high tariffs on Chinese light bulbs...

Mr Barroso said that member states "are concerned, very concerned, with the huge trade deficit between Europe and China."

Europe's trade deficit with China increased from €41.3 billion to €50.4 billion in the first half of this year, compared with the same period last year – a jump of 22%.