China - EU trade

24 October 2007
by eub2 -- last modified 24 October 2007

The European Union and China, two of the biggest markets in the world, have everything to gain by deepening their commercial ties. Since 1978, bilateral trade has increased more than 60 fold and reached approximately EUR 254 billion in 2006 (Eurostat).

BILATERAL TRADE RELATIONS

In 2006, China remained the European Union's 2nd largest trading partner and displaced the United States as the largest source of EU imports. According to Chinese statistics, the EU continued in its role as China's first trading partner (ahead of both the US and Japan). Chinese imports to the EU totalled approximately EUR 191 billion during that period, representing a year-on-year increase of almost 21%. Likewise, EU exports to China increased by 22.5% to approximately EUR 63 billion, accounting for overall bilateral trade of upwards of EUR 254 billion.

Whereas the EU enjoyed a trade surplus with China at the beginning of the 1980s, trade relations are now characterised by a sizeable and widening EU deficit with China (approximately EUR 128 billion in 2006). This represents the EU's largest bilateral trade deficit.

Generalised System of Preferences

In 2005, China was the second largest beneficiary of 178 countries of the EU's Generalised System of Preferences (GSP) scheme, under which the EU grants autonomous trade preferences to imports from developing countries. It has a share of more than 10.3% of all effective preferential imports under the GSP.

CHINA'S ACCESSION TO THE WORLD TRADE ORGANISATION

The EU was a strong supporter of China's accession to the WTO, maintaining the view that a WTO without China was not truly universal in scope. For China, formal accession to the WTO in December 2001 symbolised the crowning achievement of its integration into the global economic order (see overview of China's economic reforms and WTO negotiations).

The bilateral EU-China agreement on WTO accession signed in Beijing on 19 May 2000, together with the US-China agreement signed in November 1999, were essential milestones in China's accession process.

The commitments made by China in the context of accession to the WTO secured improved access for EU firms to China's market. Import tariffs and other non-tariff barriers were sharply and permanently reduced. As such, current EU investment in China takes place in a more attractive and predictable business environment. WTO membership also accelerated China's own efforts to promote transparency, fairness and openness more generally throughout its trade regime. Finally, WTO accession opened access for foreign companies to key service sectors such as insurance and telecommunications, which to that point had been closely monitored and restricted, if not completely prohibited As for China, WTO membership supported and accelerated domestic processes of economic reform and development.

Finally, practical experience of applying and enforcing WTO rules makes a positive contribution to strengthening the rule of law in China in areas above and beyond the specific field of trade and investment.

The commitments made by China in the context of WTO accession are detailed in the WTO accession documents (Working Party Report and Protocol of Accession). The commitments regarding the reduction of tariffs are contained in the tariffs schedule.

Ensuring full and timely implementation of WTO commitments is one of the European Commission's key priorities in its bilateral trade and economic relationship with China. The main issues identified so far by the EU include inadequate enforcement of intellectual property rights, the definition of multi-faceted industrial policies which may discriminate against foreign companies (e.g. in the automobile sector), and barriers to market access in a number of services sectors (e.g. construction, banking, telecommunications, and express postal services). Access to raw materials has recently been identified as a major trade issue as well.

In order to reflect the full breadth and depth of today's strategic partnership, the two sides agreed during the last EU-China summit in September 2006 to launch negotiations on a new Partnership and Co-operation Agreement. These negotiations shall also provide the opportunity to further improve the framework for bilateral trade and investment relations.

SUPPORTING CHINA'S ECONOMIC AND TRADE REFORMS THROUGH TECHNICAL ASSISTANCE

Since the mid 1990s, EU technical assistance to China has supported economic reforms with a particular focus on training and institutional capacity-building. After China's accession to the WTO, smooth, timely and accurate changes to the trade regime have become even more important. To this end, the EU is committed to working in partnership with China and will share its experiences in the WTO.

A major EU-China Cooperation Programme to support China's integration into the world trading system was launched on 1 February 2004, further to a pilot programme that ended in December 2003. With funding of EUR 15 million from the EU and €5 million Euro from China, this new five-year WTO programme is the most comprehensive of its type in China.

The main objective of the cooperation programme is to support China's further integration into the world economy and to assist the Chinese government in implementing its obligations and commitments in the WTO. The target groups who will benefit the most from assistance are relevant bodies of the Chinese government, higher education and research institutes, manufacturing industries, the service sector (public and private) and civil society in general.

Among other benefits, the programme yields expert opinion, research and analysis, impact studies, tailored solutions to specific policy problems, dialogue facilitation, as well as training sessions, seminars, and workshops. All of these aspects translate into trade-related capacity building as a broader integrated concept, an idea more inclusionary than an emphasis solely on market access improvements for EU firms.

The new cooperation programme focuses on core elements of China's integration into the world trading system. It consists of six components: customs, import, and export regulatory systems; agriculture and agri-food; technical barriers to trade and sanitary and phytosanitary measures; services; legislative and legal aspects of domestic implementation and IPR enforcement; and policy development, co-operation and transparency.

A Project Management Unit has been set up in Beijing to deliver benefits directly at the source while the advantages associated with implementation, such as the knowledge and skills gained via study tours in the EU, are spread evenly throughout China.

Source: European Commission