A flurry of trade-defence measures initiated by the European Commission is putting the European Union’s trade relations with China’s new political leadership to its first serious test.
Karel De Gucht, the European commissioner for trade, yesterday (15 May) formally warned China that he is prepared to impose sanctions on two telecoms equipment-makers, Huawei and ZTE Corp, if the Commission concludes that they received illegal subsidies or dumped their products on the European market.
That may be a prelude to a much bigger battle. The Commission is expected to announce by 6 June the imposition of temporary punitive tariffs on Chinese producers of solar panels. China’s solar industry exported €21 billion of goods to Europe in 2011.
Separately, permanent – five-year – anti-dumping tariffs against Chinese producers of ceramics and stoneware come into force today, a decision that won unexpectedly strong backing from member states on 4 April.
With China’s new president and prime minister formally in place since only mid-March, some European industry lobbies fear that the EU’s actions could be interpreted as protectionist and could trigger retaliation from China.
The Commission says that it is legally obliged to respond to complaints from industry.
China has already indicated a willingness to retaliate. In November, it filed a case with the World Trade Organization accusing some EU member states of favouring EU producers of solar-energy equipment. Rumours in EU trade circles suggest that China is preparing a case that could target the European wine industry.
Chinese officials in Beijing and Brussels did not respond to requests for comment before European Voice went to print.
Graham Watson, a member of the European Parliament’s delegation to China, called for the solar industry to reach an international agreement. The case has deeply divided the European industry. Watson said: “The kind of in-fighting that we are seeing [in the European industry] is bad for business in general and has substantial trickle-down effects on consumers.”
A potentially placatory move by the Commission is in the offing, with the Commission expected, possibly within weeks, to ask member states for a mandate to negotiate a framework investment agreement with China. That would provide a means of addressing a range of issues that trouble European businesses in China.
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Pierre Defraigne, a former deputy director-general for trade in the Commission who is now executive director of the Madriaga-College of Europe Foundation, said the Commission was positioning itself in a broader bid to address the deep differences between the European and Chinese economic systems through international trade talks. “De Gucht, it seems to me, is trying to build up a striking force to bargain from a strong position; that’s really the only thing he can do,” he said.
That view was echoed by figures from EU business, specific industries and trade experts. They stressed that China’s possible recognition as a market economy by the World Trade Organization limits the time for negotiations on the issue of subsidies, an issue that is separate from dumping, but linked. China is expected to gain market-economy status in 2016.
However, there has been no ‘high-level economic dialogue’ – a formalised forum for contacts – between China and the EU in the past two years. Adrian van den Hoven, the deputy director-general of the business confederation BusinessEurope, urged a swift resumption of discussions. The hiatus in the dialogue has heightened anxiety that China’s new leaders could harden their line on trade issues, especially as economic growth there is slowing.
A senior EU official said that, at a meeting with Catherine Ashton, the EU’s foreign policy chief, in late April, the Chinese authorities expressed concerns that the EU’s pending talks on a free-trade agreement with the US could shut out other trade relations.
The EU’s strategy will be heavily influenced by Germany because of its overwhelming role in EU-Chinese trade. More than half of the EU’s exports to China are from Germany.
The German government abstained from voting on retaliatory tariffs in the ceramics case and has in recent days called for a negotiated settlement of the solar-panel case, – in which the complainant, SolarWorld, is German. Germany is also expected to be pivotal in the telecom case.