Page 2 of
2 EU unleashes a paper
tiger By Axel Berkofsky
populist rhetoric - typically
voiced by politicians close to an election and
European entrepreneurs who hoped that Europe would
be allowed to board the globalization train a
little later than the rest of the world. Instead,
"your job will soon go to China" megaphone
rhetoric is becoming something to relate to in
Europe these days.
Beijing joins the
debate, claiming that the trade damage is
self-inflicted in view of Europe's growing
appetite for cheap Chinese-
made
brassieres, T-shirts and shoes. What's more,
Beijing is insisting that its willingness to avoid
EU-China "bra wars" by voluntarily agreeing to
limit its textile exports to Europe is not
something Beijing is obliged to do. Rather, China
has been doing the EU a "favor", the official line
in Beijing goes.
Brussels begged to differ
and returned the "favor" last October by imposing
an additional 16.5% import tariff on Chinese (and
also Vietnamese) shoe imports for two years. The
EU's Directorate for Trade (or DG Trade in EU
lingo) claimed (accurately, as the data available
to EU sources prove) that Beijing is providing
shoe (and textile) producers with enormous
financial subsidies enabling them de facto to
eliminate European competition for certain shoe
categories.
However, imposing additional
tariffs on Chinese shoes for a period of two years
looks like an ill-fated short-term shot at the
problem, evidently in the absence of a coherent
long-term EU strategy for how to deal and reduce
the deficit in the long run.
Besides, the
EC has yet to explain plausibly how southern
European shoemakers will perform the miracle of
diversifying their businesses to deal with Chinese
competition within two years.
Either way,
China has recently taken the shoe-tariff case to
the WTO, asking the global trade body to scrap the
tariffs, which amount to "political
discrimination" as far as Beijing is concerned.
Good luck with that.
From a European
perspective, imposing tariffs on Chinese imports
or other ill-fated short-term "countermeasures"
will probably not not do the job of reducing the
bilateral trade deficit with China. Encouraging
Chinese business to invest in Europe, on the other
hand, might.
For the time being, Chinese
multinationals and investors might not yet have
the economic clout to invest on the scale the
Japanese did (more or less voluntarily) in the
1980s and 1990s, but a penny saved is still a
penny earned. So far, the EU paper points out,
Europe only attracts a very modest 2% of China's
global foreign direct investment (translating into
roughly $3.9 billion), while trade with the EU in
2005 accounted for an impressive 20% of China's
overall external trade.
The EU's paper on
China trade is very unlikely to change anything
about EU-China trade and business overnight and
Beijing has already made it clear that it
disagrees with a lot on Brussels' list of its
alleged failures to play by the rules of
international trade and investment.
Indeed, many of the issues have been on
the agenda for years and many will remain there
for years to come, given that the EU's instruments
to oblige China to play and trade by the rules are
limited. Also, Brussels probably does not want to
push it too much, in view of European interests in
China and the ability of Chinese local and central
government officials to make conducting business
easy, or indeed less easy, depending on the orders
from the top.
While European business and
investors will continue to put up with
market-access obstacles and tariff and non-tariff
trade barriers because they enjoy the benefits of
cheap Chinese labor, Beijing for its part will
continue to feed European (and US) trade officials
with the occasional "you don't understand China"
rhetoric aimed at scotching criticism at the
outset of trade disputes.
In the meantime,
European multinationals will sell what China
assembles, the bilateral trade deficit will
continue to grow, and Brussels will continue to
publish EU policy papers, trade papers, white
papers, green papers and action plans to make its
voice heard.
The more it changes, the more
it stays the same? The EU hopes not.
Dr Axel Berkofsky is associate
policy analyst at the European Policy Center in
Brussels and visiting professor at the University
of Milan. The views expressed here are the
author's alone.
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