» Challenges

Europe’s Economic, Environmental and Social Challenges

Globalisation has seen the gradual restructuring of Europe’s more traditional manufacturing industries and a corresponding increase in service-based industries. Even so, the EU still consumes more than 2.6 trillion kilowatts of electricity a year and 14.5 million barrels of oil per day. At the same time, DG Environment estimates that the total amount of waste generated each year in Europe is around 2,000 million tones of which over 40 million tonnes are classified as hazardous. It also faces a number of social and economic challenges as the population ages.

Europe has begun to formulate a comprehensive response to the challenges of sustainable development. At the same time the influence of civil society groups in Europe, supporting the up-take of stakeholder-oriented policies, is growing. To this end, many countries have introduced recycling requirements and are gradually expanding the responsibilities of producers throughout the supply chain. Europe in partnership with other countries has established various market mechanisms, in particular, those relating to emissions trading. Stakeholder involvement mechanisms, of which the Trade SIA is a good example, are also becoming more important as a tool with which to incorporate feedback from civil society in to policy making processes.

China’s Economic, Environmental and Social Challenges

Despite its astonishing growth, several serious challenges remain for China as social and environmental indicators do not keep up with economic growth and in many cases have deteriorated further. GDP per capita, at USD 1,700, still lags far behind the level of any economy that matches China’s industrial strength, and an excess supply of labour particularly in rural areas acts as a barrier to further development.

Urbanisation on a massive scale means that the government is under intense pressure to create employment, the problem of which is exacerbated by short-term lay-offs often associated with privatisation. China faces the challenge of reforming its social security system as the benefits of substantial economic growth are not shared by all. Income disparity in China has actually widened during two decades of economic reform. According to the World Bank, China’s Gini coefficient - an international measurement of income disparity – stood 0.45 in 2005. In comparison the index in India is 0.33, the United States 0.41 and Brazil 0.54.

At the same time, pollution is increasingly a major cause for concern recognized by all sides. The World Bank concludes that pollution is costing China an annual 8-12% of its $1.4 trillion GDP in direct damage, such as the impact on crops of acid rain, medical bills, lost work from illness, money spent on disaster relief following floods and the implied costs of resource depletion.

China’s 11th 5 year programme recognises many of these problems and provides a sober and frank summary of the challenges ahead for China’s overall development. It identifies the need for China to establish a more balanced sustainable economic growth (‘the 5 balances’), with strong economic performance achieved through reduced energy and recourse inputs, reduced environmental impact and a greater spread of benefits to marginalised areas and sectors. The government plans to realign strategic industries by moving these up the value chain, addressing the overheating of some areas of the economy and by increasing the overall quality of development through increased innovation. These initiatives are intended to spearhead rural development and support every aspect of the rural economy (‘the socialist countryside’).

The PCA: An Opportunity to Address Common Challenges

China and Europe also recognise the need to further integrate economic governance, environment and social issues into policy formulation. Matching Europe’s strengths and innovations in this area with China’s challenges can serve as a solid basis for future strategic engagement, partnership and cooperation. A foundation of partnership between Europe and China built on these principles can address a number of significant challenges which still exist, particularly in the areas of trade and investment. It is clear that the current Partnership and Cooperation Agreement (PCA) between the EU and China is important for both parties in terms of economic impact, but also vital in achieving broader social and environmental policy aims.