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Trade liberalisation and overall relationship

4 - Trade and investment disputes with China

Grade: B-
Unity 3/5
Resources 3/5
Outcome 6/10
Total 12/20
Scorecard 2012: B- (11/20)

The EU had a better approach to trade-offs and reciprocity but lacked unity on what to trade with China for market economy status.  

China and Europe have the world’s second-largest trading relationship, with a large trade surplus on China’s side. The EU has an interest in securing better market access, protection against “involuntary” technology transfer from European companies and patent rights, improved conditions for investments, and reciprocity in public procurement (see also component 3).

In 2010, the European Chamber of Commerce took a strong stance on these issues for the second straight year and published a critical report on the business climate for European firms in China. The directorate-general for trade prominently advertised requests for reciprocity from China on trade issues. Anti-dumping cases have been stepped up and now involve some advanced technology such as scanners and photocopiers. Another big issue in 2010 was access to Chinese raw materials, particularly rare earth minerals. Led by Germany, whose manufacturing industry depends on rare earths, the EU took the issue to the WTO and had a first positive ruling in May.

However, there was no unity on what exactly the EU should trade with China for market economy status (MES), which is demanded by China and would make anti-dumping cases more difficult. Some member states such as the UK want to get something in return from China, while others such as Italy would like to use the lack of technical progress as cover in order to keep stricter anti-dumping laws in place. As a result, the EU got few results. Premier Wen Jiabao snubbed European Council President Herman Van Rompuy and European Commission President José Manuel Barroso at the EU-China summit – either a tactical move for raising the stakes or a genuine Chinese lack of interest since it will automatically acquire MES in 2016. On investments, the Lisbon Treaty grants authority to the EU, which is now seeking to start negotiations. Yet the EU had no unified response to the increase in Chinese “bond diplomacy” or investments in Europe.