Global Economics

The Other Trade Gap: China and Europe


As the gap feeds calls for new protectionist measures, the EU's trade commissioner plans to admonish his Chinese counterpart

EU trade commissioner Peter Mandelson is due to warn Chinese officials about the "intolerable" trend of the country's rising exports to Europe, which is creating pressure for new protectionist measures to be introduced by Brussels.

Mr Mandelson is meeting his Chinese counterpart Bo Xilai on Tuesday (11 June), following fresh reports suggesting China's global trade surplus this May had grown by 73 percent compared to the same period last year.

Speaking to journalists ahead of the visit, Mr Mandelson said that the EU's trade deficit with China is growing at ý15 million an hour and it could jump from ý128 billion in 2006 to ý170 billion this year, which he argued was "neither tolerable nor inevitable."

"I am not yet satisfied that the Chinese have grasped the scale of the problem," he said, adding that the relations between the two powers were "at a crossroads" and that "many in Europe are simply running out of patience, and pressure is going to grow."

"Of course we benefit from the lower cost of many competitively-priced Chinese exports, but we also know that in goods and services Europe has much to offer China and our full export potential is being hampered in the Chinese market," Mr Mandelson said, according to UK newspapers.

He warned that the EU could use some "trade defence instruments" or make complaints at the World Trade Organisation.

While the US is pressing for a revaluation of the Chinese yuan to slow down the speed of the exports giant, there are calls for anti-dumping measures in steel and textile industries in the EU.

Mr Mandelson has been previously criticised in some European quarters for taking a soft approach towards Beijing but on Monday he signalled a change of course in Brussels as China did not follow the fair trade balance principles it had signed up to during talks with the EU last year.

According to the European Commission's estimates, the bloc loses ý20 billion in trade opportunities each year due to Chinese market access barriers.

Brussels also criticises Beijing for its persistent reluctance to tackle the protection of European intellectual property rights, with 80 percent of counterfeit products caught up at EU borders last year originating from China.

Fears over China's R&D catch-up

Meanwhile, the EU is also increasingly on alert over China's rising potential to invest in research and development (R&D).

According to a new report presented by the EU research commissioner Janez Potocnik, Beijing is just two years away from catching up with the bloc on R&D spending and on the path to overtake both the EU and US in exports of technology products.

"It is obvious that on the level of R&D financing, what we are doing is not having a lot of influence," said the research commissioner.

He added that while the "old" EU countries are moving ahead, with Sweden and Finland already spending more than the bloc's goal of 3 percent of GDP, some of the new member states, such as Romania, Cyprus and Slovakia, are seriously lagging behind.

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