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China-EU trade: 10 years of progress

By Jiang Shixue: 0 Comment(s)Print E-mail China.org.cn, December 9, 2011

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Watch your back! [By Jiao Haiyang/China.org.cn]

China's trade relations with the EU, the world's largest economic bloc, have blossomed in the ten years since China's entry to the WTO in 2001. Every day, US$1.5 billion worth of goods travels between China and the EU. When China established diplomatic ties with the European Community in 1975, total bilateral trade was merely US$2.5 billion. By 2010, trade reached US$480 billion annually. This year, the total value of the two-way trade might surpass a record-high US$ 500 billion. The EU has now become China's largest trading partner.

Over the past decade, China has benefited from integrating itself more closely with the world. Its total GDP has become the world's second largest, up from sixth. It is estimated that China's average annual imports, totaling US$750 billion, have generated the equivalent of 14 million jobs for China's trade partners around the world. In addition, cheap products from China have enabled European families to save an estimated 300 euros per year.

China has imported more than US$100 billion in goods each year from the EU since joining the WTO, which generate more than one million jobs for the exporting nations, according to China's Vice Foreign Minister Fu Ying.

Apart from trade, both sides have benefitted from other areas of economic cooperation such as investment and technology transfer.

Despite landmark achievements, China-EU economic relations are still plagued by trade disputes. In 2001, the EU launched two anti-dumping lawsuits against China; by 2010, the number had reached 11 cases.

One of the major hurdles related to anti-dumping is the so-called market economy status (MES), used as a benchmark for the EU's trade regulations. When China joined the WTO, it agreed to be treated as a non-market economy until 2016. Under this stipulation, the EU and other trade partners tend to use other countries as ''surrogate'' indicators to determine whether China's export prices are kept artificially low. If they are determined to be lower than market value, China will be targeted for dumping.

It has been reported that some EU members have used Singapore as a surrogate to judge whether Chinese-made television sets were underpriced, despite the fact that China's labor costs are much lower than Singapore's. The truth is that few countries in the world can compete with China on labor cost, especially since the country has a population of 1.3 billion with a huge rural labor force.

After three decades of reform and opening to the outside world, China has established a socialist market economy status with Chinese characteristics deserving of MES status, yet this has still not been recognized by the EU. Interestingly enough, the EU granted the MES to Russia as early as in 2002, nine years before Russia joined the WTO. Apparently, MES status has become a political issue as opposed to a true economic indicator.

At the 2011 World Economic Forum in Dalian, China, Chinese Premier Wen Jiabao promised to help to tide Europe over during its current debt crisis. He also urged the EU leaders to view China-EU relations from a strategic perspective by granting MES status. Sadly, Premier Wen's words were interpreted as "a friendly blackmail" by some Europeans.

China never attaches any conditions to its foreign aid, a principle often criticized by the West. The MES issue and China's offer to help Europe are different in nature. But China expects to see reciprocal respect when it respects others.

Apart from "dumping", the EU also complains of its large trade deficit with China, more than US$140 billion in 2010. At the same time, however, it refuses to loosen restrictions on technology transfer. Currently, almost two-thirds of China-EU bilateral trade is undertaken by joint ventures. This means that the EU has also benefited greatly from China's increased trade surplus.

Indeed, increased trade between China and the EU means a greater possibility for disputes. However, the percentage of Chinese products hit by the EU's anti-dumping claims is only 1 to 2 percent, according to estimates. Furthermore, after China receives the MES automatically in 2016, there should be less anti-dumping charges against its products. Taking this into consideration, the future of China-EU economic relations remains optimistic.

The author is a columnist with China.org.cn. For more information please visit http://www.shenbo75.com/opinion/jiangshixue.htm

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