A Project Funded by the
Trade relations between the EU and China are thriving. Following EU enlargement in 2004, the EU became China’s largest trading partner and China became Europe’s second. Bilateral trade stood at over € 257 billion in 2006, with China registering a trade surplus of € 130.5 billion a 20% increase on the previous year (Eurostat). These developments present enormous new opportunities, but also challenges for EU-China trade and investment relations.
EU-China Trade: Opportunities and Challenges
The rapid growth of the Chinese market offers considerable opportunities for European companies. EU investment in China provides an important contribution to further the competitiveness of the Chinese economy. At the same time, due to China’s exporting power, the magnitude of its trade surplus with its major trading partners has become an increasing cause for concern, prompting criticism over issues such as the low valuation of China’s currency and lack of a level playing field for foreign companies wishing to sell their products in the Chinese market. A recently released study by DG Trade quantified the cost of non-tariff barriers to European exporters alone at over €21.4 billion. Some argue that these policies have resulted in the stagnation of wages and delocalisation of economic activities from developed countries to China where there are less social and environmental controls.
On the other hand, China argues that maintaining varying degrees of inward trade and investment controls as well as checks on its exchange rate provides an element of stability for the economy, allowing important gradual reforms to take place. China has to tackle the challenge of an increasing labour surplus and a large amount of its domestic companies operating on very low margins, struggling to compete with multinational incumbents. The large trade surplus of China with Europe and the United States, many in China argue, is largely a result of changing global supply patterns with higher value-added goods originally manufactured in more developed Asian countries passing through China to be assembled and re-exported.
The Trade SIA: An Opportunity for Dialogue
The EU-China Trade SIA is set out to assess the economic, social and environmental outcomes of a new Partnership and Cooperation Agreement (PCA) between the EU and China. The PCA should cover new commitments on trade and investments, going beyond the WTO obligations of the parties. The SIA provides the opportunity for key stakeholders both in China and Europe to directly feed into the PCA negotiations, asking their opinion on which economic, social and environmental issues are most important. This will play an important role in formulating the policy and practical measures taken to reduce any negative impacts that result from trade liberalisation and enhance the positive impacts.
