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2007-11-23 | All chapters

EU Issues Threat to China over Trade Gap
Amy Kazmin and Mure Dickie, Financial Times, 23rd November 2007

Peter Mandelson, the European Union trade commissioner, warned China yesterday that the EU could be forced to use anti-dumping measures to defend itself against Chinese exports if Beijing failed to help reduce an "unsustainable" trade deficit rising by €15m ($22.3m) an hour.

Mr Mandelson's comments reiterated the call he made in Washington this month highlighting Brussels' concern ahead of a Sino-EU summit in the Chinese capital next week.

European frustration with China's limits on market access for foreign companies and an exchange rate policy seen as undervaluing the renminbi has been fuelled by the growth of a trade deficit with China to €86bn in the first seven months of the year.

"Europe is becoming more open to China, but I can't sustain that unless China shows the same openness to us," Mr Mandelson told the Financial Times, warning he would come under increasing pressure to take tougher action if Beijing did not move to clear market barriers.

"During the six days that I spent in China, the trade deficit will grow by over €2bn, or €15m an hour - that is what I call unsustainable," he said. "There are real issues of market access, legal protection, as well as the other issues we are dealing with - like counterfeiting and export of fake goods."

Mr Mandelson's call on China reflects frustration among European companies at what they see as Beijing's failure to act on a host of long-standing complaints.

He said Chinese leaders needed to reduce non-tariff barriers, regulation and discrimination against European companies.

"When we pin them to the actions, they respond in terms of trade fairs and investment promotion," he said.

"I don't want take-aways or overnight presentational devices. I want real sustained action to remedy the problems."

Mr Mandelson made clear a Chinese failure to deliver change could force Brussels to resort to trade defence measures, such as anti-dumping duties, or - in extremis - complaints to the World Trade Organisation.

China should "manage its currency better" for its own economic good and to address the widening trade gap, he said.

Mr Mandelson's warning will add to tensions surrounding next week's EU-China summit.

A survey of EU companies by the European Union Chamber of Commerce in Beijing highlighted dissatisfaction with China's lack of government transparency, its record on intellectual property protection and its cumbersome bureaucratic procedures.

"The investment climate is unfortunately not getting better," Joerg Wuttke, the chamber president said. Intellectual property rights protection remained a problem for 66 per cent of responding companies, he added.

In spite of such complaints, 61 per cent of companies reported being profitable and 73 per cent were optimistic about future growth, the survey found.

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