Today I would like to complete the description of the (business) relationship between China and the European Union, specifying some details about a new possible agreement which will boost not only investments in China realized by EU investors, but also the good “momentum” for Chinese investments in the old Europe. The European Commission in fact intends to open negotiations with China to reach an investment agreement that could lead to a broader trade deal if the two partners can overcome anti-dumping disputes (
http://www.euractiv.com/
).
The European Union and China are two of the biggest traders in the world. China is now the EU’s 2nd trading partner behind the United States and the EU is China’s biggest trading partner. EU-China trade has increased dramatically in recent years. China is the EU’s biggest source of imports by far, and has also become one of the EU’s fastest growing export markets. The EU has also become China’s biggest source of imports. China and Europe now trade well over €1 billion a day. (
Fact sheet: Facts and figures on EU-China trade, April 2013
, or
http://trade.ec.europa.eu/doclib/docs/2009/september/tradoc_144591.pdf
).
The EU is committed to open trading relations with China. However, the EU wants to ensure that China trades fairly, respects intellectual property rights and meets its WTO obligations.
Foreign direct investment has a crucial role in establishing businesses, creating jobs at home and abroad, as well as in setting up global supply chain.
The European Commission said that an accord would bring together current separate agreements into one text, with the aim of improving “the protection of EU investments in China as well as Chinese investments in Europe, improving legal certainty regarding treatment of EU investors in China, reducing barriers to investing in China and, as a result, increasing bilateral investment flows.” (
http://beta.dawn.com/news/1013240/eu-ready-for-talks-on-china-investment-accord
).
“An EU-China investment agreement will help deepen our ties and sends the signal that we are firmly committed to building a strong partnership,” EU Trade Commissioner Karel De Gucht affirmed on the 23 of May), asking member states to be given a mandate to negotiate the accord.
The agreement would secure access to investment markets for both sides and improve the treatment of investors and their assets – including key technologies and intellectual property rights.
The Commission added that “it should also, crucially, cover improved access to the Chinese market,” citing a key and longstanding EU concern about trade with China.
The Commission said there was “huge potential” to boost investment ties which are relatively modest considering the size of the overall trade relationship, with China counting the EU as its largest export market.
In 2011, European companies invested €17.5 billion in China, with flows the other way just €2.8 billion. Only 1.4% of total foreign direct investment into the EU comes from China.
Even though bilateral trade in goods reached €428.3 billion in 2011, trade in service remains 10 times lower at €42.6 billion. Services remain an area full of potential if China were to open its market more, the Commission said.
Europe’s trade deficit with China is mainly touching sectors like telecommunication equipment; shoes and textiles; iron; and steel.
“This step on both sides confirms the willingness and commitment to a solid and expanding mutually beneficial trade and investment relation,” the Commission said in a press release.
Note that this announcement came as Brussels and Beijing are at odds after the European Commission agreed to
impose punitive import duties
on solar panels from China in a move to guard against what it sees as dumping of cheap goods in Europe.
EU commissioners backed De Gucht’s proposal to levy the provisional duties by 6 June and make Chinese solar exports less attractive, two EU officials said.
The investigation into accusations of dumping is the biggest the Commission has launched, but Brussels is trying to tread a careful path, knowing it needs China (as noted, the EU’s second largest trading partner) to help the bloc pull out from recession.
German Economy Minister Philipp Rösler
said earlier this week that the European Commission made a “grave mistake” by agreeing to impose punitive import duties on solar panels from China and urged the Commission to work to prevent the eruption of a trade conflict.
Chinese solar panel makers have said on the 23 May, they are seeking separate trade settlements with the EU to avoid tariffs in their biggest market.
WTO Director-General Pascal Lamy
, speaking in Brussels a few days ago, blamed Europe, the United States and Japan for not having been active in the WTO to strengthen anti-subsidies rules.
Lamy explained that China’s degree of openness is halfway between India, Brazil, Indonesia on one side and Europe, the United States and Japan on the other, because China joined the multilateral trading system very late and had to pay a much higher price to benefit from this anti-protectionist trade policy than other founding members of the GATT.
Just to conclude this entry, it is also necessary to stress that Chinese entrepreneurs expect more opportunities to scale up outbound investment in Europe as they believe it will benefit both sides, this is the view of Mr. Long Yongtu, co-chairman of the International Capital Conference (ICC).
China also has been leading in attracting foreign investments and to maintain this trend it is necessary to seek a more intense cooperation especially with the EU and this proposed agreement seems to be an opportunity which will benefit both China and the EU.
Cristiano Rizzi