China not an easy partner but ready to engage, says EU

BRUSSELS - Reuters

Chinese workers labor on a television set assembly line in a factory in Shenyang, Liaoning Province, China. Europe is increasing customs walls against China. EPA photo

The European Union will not back down from protecting its industries against Chinese competition it sees as unfair, but mutual self-interest will prevent a damaging trade war, the EU’s trade chief Karel De Gucht has said.

Disputes with Beijing have taken on a bigger scale in recent months and Brussels brought its biggest ever trade case against Beijing in September after European companies accused China of dumping solar panels in Europe.

The EU is also gathering evidence to see whether Chinese telecoms companies Huawei Technologies and ZTE are dumping or receiving illegal subsidies.

“We are not going to shy away from what we have to do,” De Gucht told Reuters in an interview.

‘Not interested in escalating tensions ‘

“But we are not interested in escalating tensions. I believe that the Chinese also realize that this has to be kept within limits,” he said from his office in the European Commission.

The growing trade spats come at a dangerous time. Europe’s economy is hardly growing and the continent is suffering from record unemployment, while China’s much-faster growth is cooling. Both downturns raise the specter of social instability. De Gucht, who first got to know China during his term as Belgium’s foreign minister between 2004 and 2007, sees the tensions persisting precisely because China is seeking to produce sophisticated products that will compete with Europe.

“China is facing a tremendous challenge: how to get a larger share of the value-added pie, as it otherwise can’t possibly take the next step in economic development, which Japan, Taiwan, South Korea, Singapore and Hong Kong have already taken,” De Gucht wrote in a book published this month called “Freedom: Liberalism In A Time of Cholera.”

There he cites a Chinese curse: “May you live in interesting times.”

Trade between China and the European Union has doubled since 2003, rising to 428 billion euros ($558 billion) in 2011, making the EU China’s biggest trading partner. China is the second biggest destination for European goods after the United States.

But ongoing disputes range from metal tubes to China’s restrictions of exports of rare earth metals.
In the solar panel case, European makers want duties placed on Chinese imports amid a sharp drop in prices, something the United States has already implemented.

EU diplomats say De Gucht could be using the solar panel dispute in Europe as leverage over Beijing to push the Chinese government to cut what they see as illegal subsidies to Huawei and ZTE and avoid another formal trade case with Brussels.

De Gucht declined to go into details about the cases, but said he hoped solutions could be found.

“You can imagine that: a mushrooming of problems between China and Europe,” said De Gucht, one of Europe’s most powerful commissioners and who leads trade policy on behalf of the EU’s 27 countries.

“Both parties realize that this would be a very bad thing for the whole of the world economy.”

The U.S. ambitions of Huawei and ZTE were stopped earlier this month as a congressional report urged American fims to stop doing business with the firms, raising fears of retaliation from China. Europe’s dealings with Beijing lack the geo-political dimensions of China’s relations with other big trading partners like Japan.