Surplus fuels EU-China war of words
Saturday, 16 June 2007
Andrew Bounds in Brussels
China said it could do little to curb its fast-growing trade surplus with the European Union as the two sides traded accusations after "frank" talks in Brussels last week.
Peter Mandelson, the EU trade commissioner, and Bo Xilai, the Chinese commerce minister, held an annual meeting in Brussels as China's trade surplus hit record levels.
The EU's trade deficit with China is expected to balloon to €170bn ($227bn, £115bn) by the end of the year on Brussels' figures, up from €128bn last year. While Mr Mandelson said that was unsustainable, Mr Bo characterised it as "complementary and balanced".
He said China was processing goods that previously had been exported to the EU directly from other Asian countries, since the latter had offshored final production to the lower-cost country. The rest of the rise came from Europe having abandoned most low-skilled manufacturing.
He did pledge, however, to try to boost imports, citing recent deals to buy Airbus aircraft and nuclear power technology.
Mr Bo accused his British counterpart of "extremist language" after he termed various aspects of China's trade policy "illogical", "indefensible" and "unacceptable" at a Brussels news conference after talks.
Mr Mandelson said China was doing nothing to rein in rampant counterfeiting that was costing European business hundreds of millions of euros and used "indefensible barriers" such as strict licensing laws, discriminatory rules, and laws forcing foreign companies to create joint ventures with local partners.
However, Mr Bo said that China was as open to EU service providers as the EU was to Chinese ones.
At his own news conference he hit back, calling the refusal of the EU to grant China market economy status "illogical". The ranking is a technical measure but Beijing sees it as a matter of pride.
Neither the EU nor the US has accorded Beijing this status, though 56 World Trade Organisation members have. It would make it harder to bring trade disputes to the WTO.
Mr Mandelson said China had fulfilled one of five criteria. He said market economy status would be granted as soon as the others were met.
Despite the rhetoric, the two sides did agree to put forward at the EU-China summit in November a "realistic, practical proposal" to dismantle trade barriers and curb the EU's growing deficit with China.
They would also discuss rising steel exports to the EU. Mr Mandelson said China was possibly dumping steel and he would invoke protection measures if the talks failed. Mr Bo suggested they could follow the blueprint of the successful 2005 voluntary textile agreement. That agreed rising quotas that will expire at the end of the year. The EU is not seeking to extend them.
The two sides are also examining how to ensure royalty payments for European companies that had transferred technology to China. The US recently won such a deal for Microsoft, the software maker.
Mr Mandelson said he failed to understand "the continued operation of very large fake and counterfeit markets without any interference by the Chinese government". However, Mr Bo said China had taken huge steps to curtail piracy, not least because its own companies suffered.
China may accelerate already expected tightening measures, including further interest rate increases, following a rise in inflation in May driven by a surge in food prices, especially pork, the country's staple meat, writes Richard McGregor in Beijing.
Inflation reached 3.4 per cent in May, the third month in a row it has been on or above the central bank's 3 per cent "comfort zone" and nearly double the 1.9 per cent rate in November last year.
Beijing is traditionally wary of inflation, because of its impact on savings but also its role in sparking political turmoil in the late 1980s, when it hurt and angered groups on fixed incomes, such as students.
The 3.4 per cent rate outstrips the one-year deposit rate of 3.06 per cent, leaving savers with negative real interest rates.
Most China economy analysts contacted on Tuesday said they did not expect the People's Bank of China, the central bank, to push for an immediate rate rise.
China said it could do little to curb its fast-growing trade surplus with the European Union as the two sides traded accusations after "frank" talks in Brussels last week.
Peter Mandelson, the EU trade commissioner, and Bo Xilai, the Chinese commerce minister, held an annual meeting in Brussels as China's trade surplus hit record levels.
The EU's trade deficit with China is expected to balloon to €170bn ($227bn, £115bn) by the end of the year on Brussels' figures, up from €128bn last year. While Mr Mandelson said that was unsustainable, Mr Bo characterised it as "complementary and balanced".
He said China was processing goods that previously had been exported to the EU directly from other Asian countries, since the latter had offshored final production to the lower-cost country. The rest of the rise came from Europe having abandoned most low-skilled manufacturing.
He did pledge, however, to try to boost imports, citing recent deals to buy Airbus aircraft and nuclear power technology.
Mr Bo accused his British counterpart of "extremist language" after he termed various aspects of China's trade policy "illogical", "indefensible" and "unacceptable" at a Brussels news conference after talks.
Mr Mandelson said China was doing nothing to rein in rampant counterfeiting that was costing European business hundreds of millions of euros and used "indefensible barriers" such as strict licensing laws, discriminatory rules, and laws forcing foreign companies to create joint ventures with local partners.
However, Mr Bo said that China was as open to EU service providers as the EU was to Chinese ones.
At his own news conference he hit back, calling the refusal of the EU to grant China market economy status "illogical". The ranking is a technical measure but Beijing sees it as a matter of pride.
Neither the EU nor the US has accorded Beijing this status, though 56 World Trade Organisation members have. It would make it harder to bring trade disputes to the WTO.
Mr Mandelson said China had fulfilled one of five criteria. He said market economy status would be granted as soon as the others were met.
Despite the rhetoric, the two sides did agree to put forward at the EU-China summit in November a "realistic, practical proposal" to dismantle trade barriers and curb the EU's growing deficit with China.
They would also discuss rising steel exports to the EU. Mr Mandelson said China was possibly dumping steel and he would invoke protection measures if the talks failed. Mr Bo suggested they could follow the blueprint of the successful 2005 voluntary textile agreement. That agreed rising quotas that will expire at the end of the year. The EU is not seeking to extend them.
The two sides are also examining how to ensure royalty payments for European companies that had transferred technology to China. The US recently won such a deal for Microsoft, the software maker.
Mr Mandelson said he failed to understand "the continued operation of very large fake and counterfeit markets without any interference by the Chinese government". However, Mr Bo said China had taken huge steps to curtail piracy, not least because its own companies suffered.
China may accelerate already expected tightening measures, including further interest rate increases, following a rise in inflation in May driven by a surge in food prices, especially pork, the country's staple meat, writes Richard McGregor in Beijing.
Inflation reached 3.4 per cent in May, the third month in a row it has been on or above the central bank's 3 per cent "comfort zone" and nearly double the 1.9 per cent rate in November last year.
Beijing is traditionally wary of inflation, because of its impact on savings but also its role in sparking political turmoil in the late 1980s, when it hurt and angered groups on fixed incomes, such as students.
The 3.4 per cent rate outstrips the one-year deposit rate of 3.06 per cent, leaving savers with negative real interest rates.
Most China economy analysts contacted on Tuesday said they did not expect the People's Bank of China, the central bank, to push for an immediate rate rise.