Op-Ed Contributors

Trade tops Merkel agenda

By Fraser Cameron (China Daily)
Updated: 2010-07-16 07:59
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Trade policy is an area of EU competence and Berlin has to bow to Brussels in decision-making. The EU is bogged down in negotiations with China over a new strategic agreement, with trade issues being the biggest stumbling block.

German Chancellor Angela Merkel's visit to China is seeking to cement economic ties between the economic powerhouses of Europe and Asia. China's remarkable growth, even when other G20 countries were struggling last year to deal with the worst economic recession in decades, has enabled Asia as a whole to emerge in a much better shape.

Recent economic figures suggest that Germany may be playing its traditional "locomotive role" in Europe. Manufacturing output was up 5.6 percent in the second quarter compared to the first three months of 2010. Engineering and chemicals have moved beyond pre-crisis levels of output, while many other key sectors are approaching previous peaks. China is a main driver of the German recovery. Mercedes announced that it sold a record 13,700 cars in China in June. Other German firms have seen a similar surge in demand from China.

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Overall, German exports have risen nearly 15 percent this year helped by the 10 percent fall in the value of the euro against the dollar. This is good news for the rest of Europe where governments are struggling to escape recession while seeking to implement tough austerity measures.

But if the rest of Europe expects Germany to take steps to increase domestic demand they may have a long wait. Germany has a historic dislike of debt and inflation. Whereas the average American has 12 credit cards the average, German has two. Berlin was reluctant to bail out what most Germans regarded as the profligate Greeks. Eventually, it signed the European Union (EU) rescue package but not without making it clear that there were limits to the depths of Germany's pockets.

Germany has sought to reduce public spending, but there are rifts in the ruling coalition of conservatives (Christian Democrats) and liberals (Free Democrats). Merkel has struggled to assert her authority over a coalition that seems to spend more time bickering in public over how to make budget cuts than actually governing the country. She suffered a further blow to her waning prestige last month when her candidate for the presidency, Christian Wulff, secured election only on the third ballot.

Merkel will probably be relieved to escape the plotting in Berlin for the red carpet in Beijing. Germany is China's biggest trade partner in the EU. Merkel and Chinese Premier Wen Jiabao are expected to announce a number of new deals that should further cement bilateral ties.

Trade policy, however, is an area of EU competence and Berlin has to bow to Brussels in decision-making. The EU is bogged down in negotiations with China over a new strategic agreement, with trade issues being the biggest stumbling block. Brussels thinks Beijing is not fulfilling WTO commitments on protection of intellectual property rights and criticizes China for erecting numerous non-tariff barriers which make life difficult for EU companies seeking to enter the Chinese market. Beijing in turn charges the EU with being too ready to resort to anti-dumping measures.

Attitudes of Europeans towards China are changing, too. A recent poll suggests that more than 50 percent Europeans are concerned over "unfair economic competition" from China. These concerns are likely to fuel calls for protectionist measures, calls which are already loud and clear in the US Congress.

The media have a crucial role to play in shaping attitudes on both sides. According to a recent survey, 70 percent Chinese believe they get an accurate picture of Germany from their media, while more than 50 percent think that the German media is biased against China. This is largely because the two sides differ on values with the German media playing up questions of human rights and giving prominence to the Dalai Lama.

This was most evident in the January visit of German Foreign Minister Guido Westerwelle to China when he said "promoting human rights, protection of minorities, freedom of opinion, the press and religion is a key element in our values-based foreign policy". After his talks with Chinese Foreign Minister Yang Jiechi, he went on to say that "differing views had been expressed on the Tibet issue and on the work of the Dalai Lama".

Differences over the Dalai Lama had led to a minor rift between China and Germany in 2007 when Merkel met with him. That meeting was strongly criticized by Beijing. The Chinese subsequently cancelled a number of visits and planned meetings with German ministers and officials.

Merkel cannot avoid mentioning human rights during her visit to China, otherwise she would face criticism in the German Parliament and from civil society back home. But the focus will be on trade and economic issues. Merkel will have an entourage of German businessmen seeking to further develop the existing strong ties between Germany and China. The business community is not noted for raising sensitive issues of human rights. But it should take an interest in the rule of law as China's future development will very much depend on the global market operating with global rules.

The West alleges that corruption and the absence of an independent judiciary where businessmen can claim redress are two major failings. As the top exporting nation, Germany has a vital interest in helping China tackle these problem areas. Real change can only come from within China but gentle prodding from a close trading partner can also help. This is the hidden message Merkel is likely to carry to China.

The author is an adjunct professor at the Hertie School of Governance in Berlin.

Trade tops Merkel agenda

(China Daily 07/16/2010 page9)