Looking Beyond the Crisis – Making the EU-China Relations Work Go back »
2011-11-14 | All chapters
Looking beyond the crisis - making the EU-China relations work
EU-China High Level Forum, 8th November 2011
China and Europe are major pillars of the global economy. We form the second largest economic cooperation in the world, our mutual trade in goods and services reaching 432 billion EUR in 2010. And this trade is growing. Indeed, in a few decades, Europe has become the largest market for Chinese exports, whereas China is the second largest export market for the EU. Over the last decade, European companies have contributed hugely to China’s economic development with investments, jobs, and being the largest contributor to China of transfer of technology. And rapidly growing Chinese market has provided new opportunities for European companies. This is a situation that has so far benefitted both parties.
2011 marks the 10 year anniversary for China's WTO membership. China used the WTO preparations in the nineties to pursue ambitious economic reforms. And it has used the years as a WTO member to increase trade and international economic integration, and to establish itself as a major international economy through trade and access to other members’ markets. Over the next 5-10 years China is projected to become the largest global economy. It is already a highly productive and high-tech capable economy - on the doorstep of manifesting itself in the highest end of the scale with services, brands, innovation etc.
But to get there, there are important challenges to overcome. Addressing them will be essential for China itself in its aspirations to continue economic development. But it will be equally important for China's international partners. China's impressive economic rise would not have been possible without an open global trading system. This continued openness of markets remains a pre-requisite also for China's further development. But open markets cannot be taken for granted, and are essentially a two-way street. When problems relating to market access and non-discriminatory treatment of companies on the basis of their origin keep piling up, people start questioning the legitimacy and rationale of keeping the European market open. I am not one of the sceptics myself, but I see the dangers of this development for the very prosperous long-term agenda that should be possible between our two economies.
Indeed, some question whether China’s and the EU’s long-term vision risk getting high-jacked by short-term irritants. On the way forward, we need to convincingly clear our path from these issues that keep building up. In particular, we need to more effectively engage on the following issues:
An open business climate: there is a general feeling in Europe that economic openness in China is not improving. The recent annual report from the EU Chamber of Commerce in China seems to confirm that the business climate in China gets worse, reflecting a severe imbalance in market access and significant behind-the-border issues
Investments in China, where key sectors remain closed or subject to ownership restrictions. This blocks significant economic gains on both sides from being realized. It erodes the platform for explorative talks on a possible investment agreement. It also plays into the hands of those in Europe who see Chinese investments as a threat. So far, we have kept this debate at bay by maintaining that Europe’s open investment regime remains our strongest argument for others to grant us similar access
Protection of Intellectual Property: Significant infringements undermine not only European investments and technology transfer to China, but just as much China's ambitions to become an innovative economy
Procurement: We keep hearing complaints from European businesses that the Chinese procurement market is closed and lacks transparency and regularity. This has also spurred a debate in Europe to strengthen 'reciprocity' in our external economic relations
Raw Materials. Hopefully, the ongoing WTO case will contribute to undistorted access to raw materials in China. As a major importer of raw materials itself, China also has an interest in maintaining open and non-discriminatory global access to raw materials, including amongst others iron ore and cotton
Subsidies and State Owned Enterprises. These are issues which are rapidly rising in importance, and there are increasing calls in Europe to address them to restore more level playing field to our economic operators. To deal with this situation we need to engage in dialogue on these issues. More transparency on them would also be very helpful.
China and Europe share a strong determination to move beyond the economic crisis. The European Union and its businesses have been put before one of their greatest “stress tests” ever. To stabilize the situation, the European Commission has led in providing bold answers on financial regulation and economic governance. The euro-crisis is reinforcing the need for comprehensive internal reform. There is no "back to business as usual". And this changing landscape is not limited to Europe. Due to the interdependency of economies in today's globalised world, everyone is affected and will be ultimately faced with similar challenges of finding solutions to balance the economy, or maintain growth. These are global challenges. With the size of our economies, it is normal that our partnership increasingly focuses on responsibilities in addressing these, and other global challenges, like climate change and food security. The similarities of our approaches and the issues we are both facing are well illustrated in the plans we have laid out for our future economies. China has its new Five Year Plan. In the EU we have our EU2020 plan. There are many similarities to build on, among others focus on more green and sustainable growth based on innovative economy. China’s new Five Year Plan also points in a direction where China appears ready now to take the necessary steps to rebalance its economy: to increase its internal consumption, rely less on exports, and open its economy more.
I believe that Europe has a lot to contribute, also in the future, for China's economic development and the achievement of the ambitious goals of the new Five Year plan. This however requires that our companies will continue to be welcome to China, on an equal footing to the domestic operators. More balanced, and what we call "reciprocal" market access, is also increasingly important to fight the rising tendencies in some parts of Europe seeing Chinese investment and access to the European market as a threat. In order for us to maintain the wide public support to our policy of open markets, we need to be able to demonstrate to our constituencies that our openness is not misused by others by maintaining significant – open or hidden - barriers to access to their markets to the detriment to our operators.
This brings me back where I started: it is very important not to jeopardise the potentially very promising long term agenda for our economic relationship by letting short-term trade irritants to amount, without addressing them in time. I admit that some of these issues are not easy, neither are they pleasant, but we should see beyond the immediate horizon and recognise the significant mutual benefits that can accrue to both of us, were we able to make progress on them...