End to EU-China Trade War?

Written by | Monday, October 28th, 2013

China is the world’s second biggest economy and largest exporter in the world and analysts predict that Beijing might become the number one economy in the coming ten years given its current 7.7 % growth rate. The European Union and China are two biggest traders worldwide, and the 28-country block is China’s second most important trade partner after the United States. Currently, both powers trade about 1 billion EUR every day.
Although EU-China trade has increased dramatically over the past several years, its bilateral trade in services accounts for about one tenth of the total. Investment relations also show untapped potential. Currently, only about 2-3% of Europe’s FDI reach China. Therefore, it is precisely access to investment that the EU is seeking when negotiating new trade framework with Beijing.
EU-China trade ties were, by last week, endangered by a number of issues ranging from wine to steal to solar panels. On Thursday last week, trade representatives of both parties met to overcome these minor issues given the volume of mutual trade interest. China’s Vice-Premier Ma Ka said that China is ready to act and work towards the enhancement of bilateral trade links. In his words, China is about to launch trade negotiation during the EU-China Summit on November 21.
The EU’s main goal is to use the summit to help achieve the relaxation of investment restrictions on the Chinese side. Moreover, EU companies are especially eager to enter China’s banking and financial sector, which is also subject to numerous regulations for foreigners. EU officials believe that China’s (un-)willingness to negotiate an investment deal is going to be a profound test of Beijing’s ability to compromise and adhere to the standards of the World Trade Organization (WTO). Under WTO legislation, it is forbidden to subsidize own companies to undercut foreign competitors, which is what China is doing, according to the EU. More specifically, Brussels is still contemplating to open an anti-subsidy and anti-dumping case regarding the anti-competitive behavior by Chinese producers of mobile telecommunications equipment operating in Europe. Just for reference, China became a WTO member in December 2001.

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