The European Union (EU) is a political and economic union of 28 member states that are located primarily in Europe. The EU has developed an internal single market through a standardised system of laws that apply in all member states. EU policies aim to ensure the free movement of people, goods, services, and capital within the internal market, enact legislation in justice and home affairs, and maintain common policies on trade, agriculture, fisheries, and regional development. A monetary union was established in 1999 and came into full force in 2002, and is composed of 19 EU member states which use the euro currency.
EU TRADE WITH CHINA
Relations between China and the European Union (EU) were established in 1975. According to the European External Action Service, the EU and China relations aim for cooperation in the areas of “peace, prosperity, sustainable development and people-to-people exchanges.”
In the jointly adopted EU-China 2020 Strategic Agenda for Cooperation of 2013, the EU reaffirms its respect for China’s sovereignty and territorial integrity, while China reaffirms its support to EU integration. The annual EU-China Summit is being held each year to discuss political and economic relations as well as global and regional issues.
The EU is committed to open trading relations with China. However, the EU wants to ensure that China trades fairly, respects intellectual property rights and meets its obligations as a member of the World Trade Organization (WTO).
In 2013 the EU and China launched negotiations for an Investment Agreement. The aim is to provide investors on both sides with predictable, long-term access to the EU and Chinese markets and to protect investors and their investments.
The European Union and China are two of the biggest traders in the world. China is now the EU’s second-biggest trading partner behind the United States and the EU is China’s biggest trading partner.
Most of this trade is in industrial and manufactured goods. China’s top five imports are crude petroleum, integrated circuits, iron ore, gold and cars.
Besides, trade of services play an important role in all modern economies. In terms of science and technology China and the EU launched their first science and technology cooperation program in 1983. They also drafted an Agreement on Scientific and Technological Cooperation in 1998 which was renewed in 2004 with the aim of linking research organisations, industry, universities and individual researchers in specific projects supported by the EU budget.
The EU-China 2020 Strategic Agenda for Cooperation puts an EU-China Investment Agreement as central to the EU’s long-term bilateral relations with China. Negotiations for the Investment Agreement began in 2013
The negotiations aim to:
- improve investment for European and Chinese investors by creating investment rights and guaranteeing non-discrimination
- improving transparency, licensing and authorisation procedures
- providing a high and balanced level of protection for investors and investments
- rules on environmental and labour-related aspects of foreign investment
The EU concluded an impact assessment before negotiations started. It is now carrying out a Sustainability Impact Assessment to assess the potential economic, social, environmental, and human rights impact of the agreement.
More on investment
- China is the EU’s biggest source of imports and its second-biggest export market. China and Europe trade on average over €1 billion a day
- EU’s main imports from China are industrial and consumer goods, machinery and equipment, and footwear and clothing
- EU main exports to China are: machinery and equipment, motor vehicles, aircraft, and chemicals
- EU-China trade in services amounts to more than 10% of total trade in goods, and the EU’s exports of services make up 19% of EU’s total exports of goods
Although the EU currently has a trade deficit with China, this is compensated by European exports to other destinations; in fact the EU’s overall trade balance is positive.
During the European debt crisis, several European countries required the EU and International Monetary Fund bailouts. China assisted Europe by buying billions of euros’ worth of junk Eurozone bonds; in particular from Greece, Ireland, Italy, Portugal and Spain.
Some analysts suggested China was buying political influence in the EU but China maintains they are building strong trade ties and supporting the European economy so that trade issues can move ahead more smoothly.
THE IMPACT OF CHINA-EU TRADE ON CLIMATE CHANGE
The past ten years have been marked by an unprecedented expansion of the trade between China and the European Union (EU). This imbalance has triggered several trade disputes, but relatively little attention has been paid to its environmental impacts. International trade has serious environmental impacts. Trade results in a geographic separation of consumers and the pollution associated with the consumption of goods, which creates a mechanism for consumers to shift this pollution to other countries.
This could substantially complicate efforts aimed at addressing the problems of climate change by merely shifting, for example, emission of greenhouse gases (GHGs) to other countries. In this blog, we concentrate on the impact of China-EU trade on climate change, focusing on CO2 emissions embodied in international trade. “Carbon leakage” in China-EU trade could be a noteworthy feature, given the carbon-intensive industries in China and the growing volume of trade between China and the EU, likely adding to future disputes between the two parties for years to come.
NEW TRADE RULES
The European Union agreed new rules to guard against excessively cheap Chinese imports, ending 18 months of wrangling over trade ties with Beijing.
The European Commission, member states and EU lawmakers finally overcame their differences after a number of failed attempts, representatives of all three told a news conference.
In determining whether to impose import tariffs, the EU will now treat all WTO members the same. Their businesses will only be dumping if their export prices are below domestic prices.
But the EU will make exceptions for cases of “significant market distortions”, such as excessive state intervention, an exception expected to cover many Chinese firms.
Until now, China has been treated as a special “non-market” case, meaning EU investigators decide that its exports are artificially cheap if the prices are below those of a third country, such as the United States.
China last year launched a complaint at the WTO against Europe and the United States over their trade defense practices.
The European Commission, supported by the EU’s 28 member states, believed the rules for China needed to be changed. That meant finding a balance between adhering to WTO rules and protecting EU companies threatened by dumping.
Critics, including many in the European Parliament, said the new rules shifted the burden of proof from Chinese to EU producers, making it much harder to impose measures.
The Commission said that burden would not shift because it will issue reports on countries to determine whether their markets are distorted.
When China joined the WTO in 2001 it agreed to reform and liberalizes important parts of its economy.
While China has made progress, some problems remain:
- a lack of transparency
- industrial policies and non-tariff measures that discriminate against foreign companies
- strong government intervention in the economy, resulting in a dominant position of state-owned firms, unequal access to subsidies and cheap financing
- poor protection and enforcement of intellectual property rights
In 2016 the EU adopted a new strategy on China mapping out the European Union’s relationship with China for the next five years. The Strategy promotes reciprocity, a level playing field and fair competition across all areas of co-operation.
The strategy also includes a trade agenda with a strong focus on improving market access opportunities – including negotiations on a Comprehensive Agreement on Investment. It also deals with overcapacity and calling on China to engage with ambition at multilateral level.
The EU and China discuss policies and issues regarding trade and investment in a range of dialogues:
- the annual EU-China Summit: presidential level exchange on enhancing policy coordination on a number of issues, including trade
- the EU-China High Level Economic and Trade Dialogue: EU vice-president and Chinese Vice Premier meet to discuss issues, accompanied by EU Commissioners and Chinese Ministers
- Joint Committee on Trade: annual ministerial-level meeting
- Trade and Investment Policy Dialogue: Director-General level meeting
- Economic and Trade Working Group: expert-to-expert discussion