One-Way Traffic
October 17, 2007
European officials adopted an unusually strident tone this week on Chinese trade policies, saying Brussels may rethink its relatively soft approach towards China if Beijing doesn't move to correct a growing trade imbalance with the EU.
In a letter to the president of the European Commission, EU Trade Commissioner Peter Mandelson suggested that China took business in Europe for granted, the BBC reported on Wednesday, Oct. 17.
While China is the EU's biggest source of manufactured goods, European exports to China are of minor economic importance.
The EU sold more goods to Switzerland than it did to China, Mandelson's letter said, adding that the trade deficit between the EU and China was growing at about 14 million euros ($19 million) every hour.
"The Chinese juggernaut is, to some extent, out of control," Mandelson added.
Beijing in need of a course correction?
Separately, Serge Abou, the EU's ambassador to China, said on Wednesday that Beijing hadn't done enough to assuage European concerns on a host of issues ranging from government subsidies for domestic industry to market access barriers for European imports or the yuan's exchange rate.
"We asked the Chinese government for some correction, some policy changes, and we do not see a significant answer," Abou told reporters.
The ambassador singled out the steel industry, saying Chinese exports to the EU had grown from around 1 million tons in 2005 to 5 million tons last year -- and could hit 12 million tons this year.
"We have some ideas that this export of steel has been subsidized and so we will not prevent our industry from raising some complaints," Abou said. "If they raise some complaints, we will investigate."
Abou added that the EU's ballooning trade deficit with China, which reached 130 billion euros last year, would probably grow another 20 percent to 25 percent this year.
"It is certain that these facts are considered with a certain bitterness in our leadership, and that we would like a real debate on these issues," he said.
Currency tensions
In contrast to the US -- which is locked in trade disputes with China at the World Trade Organization -- the EU has so far been less non-confrontational about pursuing punitive measures. Instead it has regularly cautioned Beijing about issues such as intellectual property rights and the value of the yuan.
Both the US, which also has a trade gap with China, and the EU have criticized Beijing about the value of the yuan, saying the Chinese currency is massively undervalued to give Chinese exporters an unfair advantage.
"If China makes an effort toward the dollar and does not make an effort towards the euro, while we are the first trade partner of China, there is something wrong in the reasoning," Abou said.
A level playing field needed
EU finance ministers last week singled out the yuan's inflexibility as a primary culprit behind global market imbalances and said they planned to send a delegation to Beijing later this year to discuss the currency.
Mandelson also told the BBC that there needed to be a level playing field on trade with China.
"If we want to sustain a policy of openness towards China politically, we have to make sure that the public is satisfied that that trading relationship is being conducted on full and fair trade, otherwise we are going to be in trouble," Mandelson said.