EU-China trade to benefit both
By Wang Wei (China Daily)
Updated: 2004-10-09 10:14

[The author Wang Wei is an associate professor with Institute of World Economics and Politics, Chinese Academy of Social Sciences.]

With the European integration, in particular, the launch of the euro, the European Union (EU) has fundamentally changed the world economic pattern and successfully brought new co-operation opportunities to EU-China economic relations.

The two-way trade has increased more than forty-fold since 1978 when China began to carry out its economic reform policy, and reached US$125 billion last year.

China is now the EU's second largest non-European trading partner, after the United States.

The EU was China's third largest trade partner last year and the second in the first two months of this year. The EU is the biggest supplier for China in terms of technology and equipment. There were nearly 2,000 technology import projects from the EU to China with a total amount of more than US$3.3 billion by contract last year. The EU is also an important foreign investor in China, ranking as the fourth foreign direct investment (FDI) origin in terms of utilized FDI.

China now emerges as a major world trading nation due to more than 20 years of economic reform. It has gradually and successfully transformed from a central planed economy to a market-oriented one which engages in global commerce.

China has been one of the largest countries in the world in terms of FDI inflow, US$53.5 billion last year. During nearly the same period, European integration had reached a significant high level and profound changes have been taking place, especially with the boosting of the European single market which has greatly increased the EU's overall competitiveness and leverage in the world market.

Being the biggest developing country in the world, China has rich human resources and an enormous market. As a region with the largest number of developed countries, the EU boasts abundant capital and advanced technology. The two sides enjoy a high degree of complementarities in economic, trade, scientific and technological fields.

The EU and China both have a long history and brilliant cultures, making outstanding contributions to human civilization and progress. These common points have provided a solid foundation for the establishment and development of the EU-China constructive partnership.

China and the EU are important forces on the international stage and share wide-ranging interests in safeguarding world peace and stability and promoting common economic development.

China is dedicated to reform and opening-up as the EU works hard to build on its integration. This has given a new impetus to increased friendly exchanges and co-operation. There is no doubt that the present time is the most harmonious period in the history of EU-China bilateral relations.

China has always been positive about European integration, because it believes a stronger EU will be a significant player on a multipolar world stage. European integration and its development are not only a matter for Europeans, but also has a strong impact on regional and global situations.

Economically, China benefits from the unified market of the EU in foreign trade. The entrance cost has been greatly decreased. It is much more convenient for China in trade or other co-operation with the unified standards and tariff, especially after China's accession to the World Trade Organization (WTO).

China welcomes more EU development aid, especially in such fields as environmental protection, poverty-alleviation, public health and hygiene and education. China also welcomes a stronger and more active role of the EU in human resource development, in particular, personnel training for China's central and western regions and build-up of China's capacity of participating in a multilateral trading regime.

According to the EU embassy in Beijing, there are about 25 projects with a total amount of 250 million euros (US$307 million) operating by the EU in China.

On the other hand, the EU is actively pursuing closer ties with Asia, a new land of opportunities. China is one of the most important countries in Asia. Closer EU-China relationship is the way for the EU to enhance its impact on Asia.

China's WTO membership will bring benefits both to China and to its trading partners, ensuring a greater degree of certainty for traders in China and around the world. The EU has already put in place several projects aimed at helping China meet its WTO obligations.

Despite the great development and fruitful achievements on the EU-China economic relation, there are two difficult and sensitive areas for EU-China economic relations: trade deficits for the EU and technology barriers to China.

Accompanying the euro appreciation since 2001, EU-China trade has rapidly grown and the EU trade deficit to China has been enlarged to 47.4 billion euros (US$58.3 billion) in 2002. The EU attributes the deficit to the obstacles in market access in China. EU policy in this area is aimed at the liberalization of trade and investment flows. Key objectives include the removal of barriers to imports of specific goods (price controls, discriminatory registration requirements, arbitrary sanitary standards); the removal of obstacles to investment (geographical restrictions, joint venture requirements, discriminatory licensing procedures, outright closure of certain sectors to foreigners, restrictive foreign exchange regulations); and the improvement of the business environment (protection of intellectual property rights etc).

China argues the situation is due to the EU's trade protection policies. In addition, restraints on technology transfers have been another main reason for the EU's trade deficits.

It's not surprising that the EU and China have differences in social systems, development levels, cultural traditions and values and hold divergent views on some issues. These differences and divergent views should not become elements impairing the EU-China relationship. Instead they should serve as a driving force for promoting EU-China dialogue and enhancing mutual understanding and co-operation. As long as the two sides handle the relations from a strategic and long-term point of view, in a spirit of mutual respect, seeking common ground and mutual benefit as well as common development, the relationship should thrive. It is reasonable to be optimistic that EU-China economic relations will continue developing smoothly. China's progress will offer more opportunities for bilateral economic co-operation. A larger EU also means more potential benefits for China.

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