Bilateral trade relations of the EU with China

Bilateral trade relations of the EU with China

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Content Introduction

1. The General Introduction of EU-China Trade Bilateral Relationships

1.1The History

1.2 High Level Economic and Trade Dialogue (HED) 1.3 Partnership and Competition

1.4 China in the World Trade Organization 1.5 Historical Data of the Trade

2. The Main Trade Types between the EU and China

2.1 Trade in Goods 2.2 Trade in Services 2.3 Trade in Capital

3. The Main Obstacles in the Bilateral Trade Relationships between the EU and China

3.1 Trade Deficit

3.2 Renminbi Revaluation

3.3 Complicated EC Technical/SPS Standards/Environment Criteria 3.4 Intellectual Property Rights (IPR) 3.5 Trade Protectionism

Conclusion

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Introduction

External trade is the EU’s largest foreign policy area and therefore its main field of interaction with major world economies. In practice, the Commission speaks for almost 500 million European citizens at bilateral and multilateral levels.

The EU stresses the importance of an effective multilateral system, built around a strong United Nations (UN) and World Trade Organization (WTO). It is working within these institutions to fight protectionism and improve global financial regulations – especially since the economic meltdown.

The USA, Russia and China are key players in EU external relations, not just at bilateral level but also at the WTO. Meanwhile, large emerging economies, like Brazil and India, are growing in importance. The EU aims to extend and deepen all these ties in the medium to long term.

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1. The General Introduction of EU-China Trade Bilateral Relationships

1.1The History

The first EU-China relations dated back to the year of 1975. The governing instrument was Trade and Co-operation Agreement in 1985. The EU’s policy goals for China include: developing dialogue on bilateral issues, like trade, energy, science and technology; maintaining dialogue on global issues, including climate change and human rights; expounding the benefits of open societies based on the rule of law and respect for human rights, with a special focus on and Xinjiang; promoting China’s further integration into the world economy; supporting its process of economic and social reforms.（这个地方有点超量，和问题在这个国家特敏感，

还是不要提为好）

Beyond regular political and trade meetings, EU and China hold around 25 dialogues on issues like human rights, environment, industry, education, and culture. In 2007, talks opened to upgrade the EU-China Trade and Cooperation Agreement into a fully-fledged Partnership and Cooperation Agreement.

In May 2009, the financial crisis was the main topic of debate at the EU-China summit in Prague. Mindful of their huge trading relationship, worth over €325 billion in 2008, leaders inked three memoranda of understanding for small and medium size companies, science, and clean energy. Because of the trade-focused nature of talks, little progress was made on human rights or climate change.

1.2 High Level Economic and Trade Dialogue (HED)

The EU-China High Level Economic and Trade Dialogue was launched in Beijing in April 2008. The HED strengthens the dialogue between the European Commission and the State Council of China, at Vice-Premier Level. It deals with issues of strategic importance to EU-China trade and economic relations and provides impetus to progress concretely in sectoral dialogues. This dialogue provides a tool to address issues of mutual concern in the areas of investment, market access and intellectual property rights protection, as well as other issues related to trade. The second meeting of the HED took place in Brussels on 7-8 May 2009.

1.3 Partnership and Competition

In 2006 the European Commission adopted a major policy strategy (Partnership and Competition) on China that pledged the EU to accepting tough Chinese competition while pushing China to trade fairly. Part of this strategy is the ongoing negotiations on a comprehensive Partnership and Cooperation Agreement (PCA) that started in January 2007. These will provide the opportunity to further improve the framework for bilateral trade and investment relations and also include the upgrading of the 1985 EC-China Trade and Economic Cooperation Agreement.

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1.4 China in the World Trade Organization

The EU was a strong supporter of China's accession to the WTO, arguing that a WTO without China was not truly universal in scope. For China, formal accession to the WTO in December 2001 symbolized an important step of its integration into the global economic order. The commitments made by China in the context of accession to the WTO secured improved access for EU firms to China's market. Import tariffs and other non-tariff barriers were sharply and permanently reduced. While China has made good progress in implementing its WTO commitments, there are still outstanding problems. The EU also uses the regular Trade Policy Review of China in the WTO to raise a number of concerns regarding China's trade policy. These include inadequate protection of intellectual property rights, the maintenance of industrial policies which may discriminate against foreign companies especially in sectors like automobiles and barriers to market access in a number of services sectors including construction, banking, telecommunications, and express postal services). Access to raw materials has also been identified as a major trade obstacle as well.（中国加入WTO欧盟的支持是否简介中提一下，或者做简要的处理）

1.5 Historical Data of the Trade

China has now become the biggest exporter in the global economy ahead of Germany and the US. China accounts for about 11 % of world trade in goods. China is the first major economy to rebound effectively from the crisis. In the first part of 2010, China’s growth rates compare with levels before the crisis. China is on track to become the world second largest national economy in 2010.

More than half of China's exports are currently produced by foreign invested enterprises (processing trade). Neighbouring Asian companies in Japan, Taiwan, Hong-Kong and South Korea play a major role in this process. The role of European enterprises in China’s processing trade regime is limited, but the majority of finished consumer goods is massively exported to the EU.

Europe's imports from China have grown by around 16. 5% per year for the period 2004-2008 but this growth rate reversed in 2009 and recorded a 13% drop due to the crisis. Nevertheless, in 2009, the EU still imported €215 billion worth of goods from China. China thus remains Europe's biggest source of manufactured imports.

China is Europe's fastest growing export market. Europe exported circa €81.7 billion worth of goods to China in 2009 - up by 4% compared to 2008 Exports from the EU to China grew by approximately € 30 billion between 2005 and 2009. Through better market access, European exporters should be well placed to increasingly sell their quality products on the rapidly expanding Chinese consumer market.

2. The Main Trade Types between the EU and China

2.1 Trade in Goods

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- Machinery and transport equipment - Miscellaneous manufactured articles

- Manufactured goods classified chiefly by material - Chemicals and related prod, n.e.s. - Food and live animals

- Crude materials, inedible, except fuels - Commodities and transactions n.c.e. - Mineral fuels, lubricants and related materials - Beverages and tobacco

- Animal and vegetable oils, fats and waxes

EU goods exports €81.7 billion to China in 2009. EU goods imports €214.7 billion from China in 2009. EU's imports from China are mainly industrial goods: machinery & transport equipment and miscellaneous manufactured articles. EU's exports to

China are also concentrated on industrial products: machinery & transport equipment, miscellaneous manufactured goods and chemicals.

EU goods trades with china in 2009billion €250200150100500exportimportdeficitexportimportdeficitsource:the european commission2.2 Trade in Services

EU services exports to China was €18 billion in 2009. EU services imports from China was €13 billion in 2009.

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EU services trades with china in 2009billion €20151050exportimport5deficit

1813exportimportdeficitsource:the european commission

2.3 Trade in Capital

The foreign direct investment of EU inward investment to China was €5.3 billion in 2009. China inward investment to EU was €0.3 billion in 2009.

billion €63210trade in capitalinvest toexportinvest toimportinvest todeficitsource:the european commission

3. The Main Obstacles in the Bilateral Trade Relationships between the EU and China

3.1 Trade Deficit

Though the EU enjoyed a trade surplus with China at the beginning of the1980s, it is now experiencing a sizeable and widening trade deficit with China. In 2007 the figure was US$134 billion. Although a large consumer market is developing in China, the EU still exports more to the 7.5 million people who live in Switzerland than to the 1.3 billion people who live in China. Europe runs a surplus on trade in services with

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China of €5.0 billion in 2009 (up from €4.9 billion in 2008). This is about 27 times smaller than its trade deficit for goods. Europe's trade deficit (including services) in 2009 was €128 billion euros. The trade deficit is focused in office and telecom equipment, textiles, and iron and steel. In the eyes of protectionists, the trade deficit reflects a huge shift within the economies of Asia to focus production in China. Although imports from China have surged, to the detriment of developing Asia and notably Japan, Asia's share of total EU imports has remained rather stable over the last decade. But the deficit still reflects the considerable problems EU businesses have accessing the Chinese market.

It is natural for a high-cost developed economy to get a deficit with a low-cost efficient economy. Under trade deficit pressure, the European objective is to either reduce Chinese imports or increase European exports to China. While the former is tantamount to a protectionist reaction, which will certainly lead to contention with China, the latter requires unfettered market access in China. This again is a bone of contention as Beijing insists that market access exists, while European companies insist otherwise.

3.2 Renminbi Revaluation

It has long been disputed that the renminbi was undervalued with the US Dollar approximately 25 to 40 percent. There is a hot topic for discussion after the Global Financial Crisis happened; the economic growth rate keeps a high speed in china, they think that it was unfairly helping to China shares in global markets and the value of the renminbi should be raised or immediately floated to let market forces decide its value. In the eyes of the critics, China’s exchange rate policy allows Chinese firms to export goods to the EU at artificially low prices, resulting in EU high unemployment rate.

3.3 Complicated EC Technical/SPS Standards/Environment Criteria

The EU is famous for its great number of stringent and sophisticated technical regulations and standards for consumer products and food. Although they were made under the claimed purpose of protecting human health and life, as well as in the consumers’ interests, inappropriate application would lead to trade protectionism, which would exert a negative impact on EU-bound Chinese exports which are subjected to no or less sophisticated standards in China. These standards, in actuality, are green barriers.

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3.4 Intellectual Property Rights (IPR)

European companies invested €5.3 billion in China in 2009 (up from €4.7 billion in 2008). China invested €0.3 billion in 2009 (compared to a net disinvestment of €1.8 billion in Europe in 2008).

Intellectual property rights infringement remains a huge problem for European businesses in China. Almost % of all counterfeit goods seized at European borders in 2008 came from China. Seven in ten European businesses operating in China say that they have been the victim of IPR violations. In 2007, European manufacturers estimated that IPR theft cost them 20% of their potential revenues in China.

IPR protection is an important issue for Europe. Rates of counterfeiting European products were reported to be around 5-10% of turnover of EU companies in China.

3.5 Trade Protectionism

The EU uses trade defense instruments following strict and non-political procedures, and to a lesser extent than other major economies. This restrictive policy is best illustrated by the fact that the uses of trade defense instruments cover only about 1% of total imports from China. (The EU on 31 May 2010 has 52 anti-dumping measures in force against Chinese imports).

European services companies continue to find it difficult to break into the Chinese market often they have to deal with red tape and cumbersome procedures. China maintains investment and ownership caps in many sectors such as banking, construction and telecommunications, although China has signed agreements to open its market. As an example, of the 22 000 telecoms licenses it has granted since 2001 only 14 have gone to foreign companies. Foreign law firms in China are still not allowed to employ Chinese lawyers and are not permitted to participate in bar exams to gain Chinese qualifications. Also in the area of procurement it is difficult to access for European companies, as so called ‘indigenous innovation” schemes close significant parts of the market to European companies.

All figures: European Commission. Updated June 2010

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Conclusion

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Source: People's Bank of China

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Reference List

http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/china/

http://www.eu4journalists.eu/index.php/dossiers/english/C94/415/

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