The European Union has always endeavoured to keep strong economic ties with the other 15 non-EU members in the G20. Growing relations between the EU and Asian countries such as South Korea, India, China and Japan are the fruit of the continent’s rapid economic expansion. These countries today have the fastest-growing economies in the world.
Within the framework of the EU-Asia dialogue, China represents the dominant power in the Asian continent. It is the largest EU trading partner in Asia, and the second largest worldwide trading partner, following the United States of America. On its part, the EU is China’s largest trading partner.
Between 2010 and 2012, the EU imported annually from China an average of €157.6bn of goods more than it had exported to this country. By 2012, the negative trade balance decreased following a rise in the level of annual exports from the EU to China. In fact exports of goods from the EU to China increased by more than 25% in these three years, from €113.3bn in 2010 to €143.8bn in 2012.
When it comes to the exchange of services between the EU and China, statistics are completely different. The EU is a net exporter of services to China, with exports of services reaching an all time-high level of €29.9bn in 2012.
EU relations with China started in the 1970s. Trade between the two was made easier following the EU-China Trade and Cooperation Agreement signed in 1985. In the past 10 years, trade has boomed following the signing of the EU-China Strategic Partnership Agreement. According to the European Commission President, José Manuel Barroso, the 2003 Comprehensive Strategic Partnership has helped the European and Chinese economies act as “forces behind the change” which took place in the last decade.
All these diplomatic developments along the years confirm that a strong platform for economic cooperation already exists between the EU and China. Actually, the EU has recently been exploring means how businesses within its member states can exploit further investment opportunities in China. One fundamental achievement of the November EU-China Summit was the official launch of a comprehensive EU-China Investment Agreement. The agreement should result in the progressive liberalisation of investment that will eventually make it easier for European investors to expand their operations in the Asian market.
President Barroso confirmed that the current EU priority in its relationship with China is job creation and the expansion of both existing and emerging industries. These industries include among others the civil aviation industry, the automobile industry, the financial sector, tourism, Information Technology, the production of energy-efficient products and biotechnology.
EU firms, including those that may potentially join the market in the future, will benefit from a vaster range of opportunities emanating from the Chinese market. Services exported from the EU to China represent only 20% of the global exports and the EU aims to increase this type of exports in order to address the bloc’s trade imbalance with China.
Despite all promising signs, the EU still has a number of major concerns on different aspects of the Chinese economy. Concerns focus primarily on the Chinese tariff regime and significant State intervention in the local market. The Chinese market does not offer a level playing field for foreign traders and investors. In reality, foreign companies are still being hindered by industrial policies, which put foreign direct investors at a disadvantage.
The EU is being urged to give more importance to the potential impact of increased participation of Chinese investors in the European market. The proposal for a China-EU Free Trade Agreement will certainly change the characteristics of the European single market permanently. Even though recovering European national economies feel at risk, in 2013 a significant number of member states criticised the European Commission for heading into a trade dispute with China over provisional anti-dumping tariffs imposed on imported solar panels.
The EU-China 2020 Strategic Agenda for Cooperation is a step in the right direction to address these problems. It offers a comprehensive approach for all EU member states to replace agreements already in place, especially with countries such as the United Kingdom and Malta who are continually seeking ways to enhance cooperation with China.
Ryan Spagnol
Executive – EU Policy & Legislation
Meusac