Nations hail Sino-European trade
By Dai Yan (China Daily)
Updated: 2004-12-15 15:57

Best in history" is how Premier Wen Jiabao described ties between China and the European Union at the China-EU Summit last week in the Netherlands.

Even Chinese grassroots audiences can feel the warm climate between the entities when they see national flags hanging in the Tiananmen Square as foreign leaders from France, Italy to German visit China.

"EU-China trade is going very well," said Franz Jessen, deputy delegation head of the EU Commission to China and Mongolia.

Outstanding trade figures are cited by Jessen as proof of the relationship bearing fruit.

Chinese exports to the EU surged by 38 per cent to US$84.8 billion in the first 10 months this year, while Chinese imports rose 30 per cent to US$57.5 billion.

Economic and trade relations between the EU and China have developed in step with the latter's emergence on the global economic scene.

China in 2002 overtook Japan to become the EU's second-largest trading partner outside Europe, with a trade volume of over US$115 billion.

And the EU has replaced Japan to become China's largest trading partner after its newest enlargement into a 25-member bloc in May.

The Hague meeting between the leaders also pushed forward co-operation in economic relations, witnessing the signing of an agreement on co-operation and mutual administrative assistance in customs matters and R&D co-operation in the peaceful uses of nuclear energy.

A higher level expected

But Xia Youfu, director of the Research Centre for China-EU Economic Co-operation (CCEEC), is not satisfied with the trade level between the two sides.

"We should find ways of further developing EU-China trade relations by defining concrete and practical actions," Xia told China Daily.

Xia said there is much lip service being paid in trade relations.

"The current level is not what it should be," Xia said.

The two sides see eye to eye on a large number of major international issues and are highly complementary economically, he said.

"More intensive political interaction should pave the way for economic exchanges that will inevitably bind us closer together," Xia said.

He proposed the two sides construct a comprehensive strategic partnership in the area to bring trade relations to a higher level.

Actually, the EU is also hoping for enhanced trade.

Peter Mandelson, the new EU Trade Commissioner, told a business summit last week that it is necessary to review and lift relations with China to a new, more intense level.

"The new European Commission recognizes the economic importance of China and will place it firmly and centrally on its radar screen," he said.

Despite the brisk trade flows, the systematic framework in the economy and trade has lagged behind.

The main legal framework for relations with China remains the "1985 EC-China Trade and Co-operation Agreement." This agreement, which replaced an earlier version from 1978, covers economic and trade relations, as well as the EU-China co-operation programme.

The old agreement does not tackle barriers that remain between the two sides' economies and which fall outside the parameters of the WTO, nor does it provide a framework for overseeing other issues of mutual interest.

Both sides have concerns

But closer trade and economic relations are not easy to achieve despite all the sweet talk.

The biggest concern for Chinese side is market economy status.

In the past year, Chinese leaders have paid great efforts to persuade other countries to recognize it, as such.

But an EU preliminary assessment on China's market economy status in June disappointed Chinese officials.

The assessment said there are remaining shortfalls in four broad areas in China, which mean that it is not possible to grant the status at this stage.

The EU side said the EU is committed to granting China such status as soon as the conditions are fulfilled, and continue to consider objectively the requests of individual Chinese companies for market economy treatment in anti-dumping investigations.

The status is only a technical standard used in the anti-dumping cases, but not a label for the Chinese economy, Jessen emphasized.

However, the status has been politically important to China and 25 countries have already made the recognition.

Jessen said the EU side is continuing to move on the issue.

"Technical experts on both sides met in November as part of the market economy status working group. Concerns were raised by both sides in an open and constructive manner. The group will meet again in six months," he said.

To the EU, enough market access to China is a must to ensure a good EU-Chinese trade relations, which is its biggest current concern.

EU markets are open to China, as witnessed by the continuing increases in the EU's trade deficit with China, which topped US$27 billion in the first 10 months and are by far the largest with any partner, he said.

Focusing potential

Technical transfer

The EU has introduced 1,393 technological items into China in the first eight months with a contractual value of US$3.65 billion, accounting for about 90 per cent of annual value last year.

Some 80 per cent of polypropylene in China is produced through the plants implemented by The Tecnimont SPA, an Italian-based Engineering and Construction Group.

"We provide first-class technology to China in support of its economic upgrade strategy. So we win many key projects in China," Chairman of Tecnimont Rosario Alessandrello, told China Daily.

The company carried out a decisive role in the development in the plastics materials industry in China, with 10 plants already launched and now in production, and another eight currently being constructed, said the chairman, as he accompanied Italian President Carlo Ciampi's China visit.

Tecnimont has to date signed 35 contracts in China, at an overall value of more than US$1.5 billion.

Investment

The EU has been an important investor in China, but it is still not big compared to its capacity, said Xia.

In recent years, EU companies have invested considerably in China as actual FDI is around US$4.2 billion on average in the last five years, bringing stocks of EU FDI to over US$35 billion.

"It is far from enough given its position of the world's largest FDI investor," Xia said.

The annual outward investment of the EU totalled more than US$300 billion, accounting for half of the world's FDI flows, according to Xia. And the EU also boasts half of the world's top 100 companies.

"But its advantage in this sector is not apparent in China," Xia said.



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