Lamy, Solana Detail EU Positions in China

Maintaining the momentum of high-level European contacts with China on both the political and economic levels, the European Union officials charged with both trade and foreign and security made scheduled but timely visit to Beijing in mid-March to explain European policy and grapple with emerging problem areas.

Lamy, Solana Detail EU Positions in China

Maintaining the momentum of high-level European contacts with China on both the political and economic levels, the European Union officials charged with both trade and foreign and security made scheduled but timely visit to Beijing in mid-March to explain European policy and grapple with emerging problem areas.

The visits, by EU Foreign and Security Representative Javier Solana and Trade Commissioner Pascal Lamy were to be followed almost immediately afterward by a similar voyage by Agriculture Commissioner Frans Fischler.

In all seven EU Commissioners were scheduled to visit China in the first half of the year, including President Romano Prodi.

Among the issues they were seeking deal with were a number related to trade and economic relations such as the recent request by the Chinese Government for compensation to offset the adverse effects of EU enlargement and a pending decisions by the EU to grant China the status of a market economy, or on the policy and strategic side the decision weighed by the EU to lift a 15-year old embargo on the sale of defence equipment to China, or a number of regional and strategic issues. The visit to focus on agricultural issues also would touch on fundamental issues involved in the stalled World Trade Organisation (WTO) negotiations on the Doha Round.

Lamy met with Vice Premier Wu Yi and the new Commerce Minister Bo Xilai. During his visit, Lamy was said by some news reports to have been pressed by China for the EU to declare a full market economy and to compensate it for the EU enlargement. The issue of market economy status has been raised in each of several recent meetings between the EU and China. Beijing has been said to be anxious to obtain the status, granted in the past to Russia by the EU, in order to defend itself against charges it is dumping goods on external markets by selling them below production price. But Lamy’s spokesperson, Aranzha Gonzalez was quoted as saying, “we need to be assured that prices and costs in China are based on market economic forces rather than state forces…We have requested a large amount of information. They have provided it in bits and pieces and we are dealing with it.” She was reported to have added that it was a technical rather than a political problem.

She added that the discussions on compensation for EU enlargement were conducted in a very constructive meeting and Lamy explained to the Minister that China would not lose out, arguing that it meant new customers and that the level of tariffs would go down.

Lamy also raised a number of ongoing EU concerns about China complying with its WTO obligations in areas such as banking, automobile distribution and restricting on raw materials such as coke and scrap, which China said it would examine.

Lamy elaborated on these EU concerns in a speech before the EU Chamber of Commerce in Shanghai on 15 March. There he explained in more details, that despite the fact that the EU trade with China had reached €135 billion in 2003, with China becoming the EU second largest trade partner and the EU standing second only to Japan in China’s trade, there were some concerns about the EU growing €55 billion trade deficit in the commerce. He underlined that this had not yet reached the commercial or political proportions that it had in the US, where it is a major political issue in the US Presidential campaign and between the US and China. He also explained that the EU deficit was smaller than the US and the EU exports to China 50% higher than those of the US despite the strong euro exchange rate and there was more understanding in the EU for China’s position and less concern than in the US that China “was mounting a geopolitical challenge.” But he cautioned, “let’s not be too relaxed about this. There is clearly pressure mounting, and the rise of the euro clearly does not help.”

He also advised China to moderate its own attitude toward the EU, noting that “To hear continued complaints about discrimination against Chinese firms on trade defence instruments, for instance, or about the threat posed by enlargement, is fairly irrelevant in this context.”

That being said, he also said he agreed with the judgement of his Chinese hosts that “EU-China relations have never been in better shape.”

But he also noted concerns about whether this “honeymoon” in relations could last in the face of what he called the “limited” concerns of European industry “that the current growth in our bilateral trade is not really positive for them.” He especially pointed to the construction sector, where China should reinstate the “foreign contractor” status rather than effectively force out EU firms from the market; the banking sector where new rules on minimum capital, ratios and deposits do not resolve problems but possibly add to them, and the planning of Chinese industrial policies, such as in the automobile sector, could negatively impact foreign firms. And he mentioned China’s policy on raw material which were creating shortages in Europe and the country’s purchasing missions to the US, which he indicated the EU was watching to assure they would not discriminate against the EU.

And he dealt at length with the WTO Doha Round of stalled negations.

Javier Solana met with Prime Minister Wen Jiabao, Foreign Minister Li Zhaoxing and State Councellor Tang Jiaxuan. And he said he would again meet with the Foreign Minister at the regular EU-China Foreign Ministerial meeting in April.

Javier Solanaat Tsinghua University

He also addressed the strategic and security relationship between the EU and China in a speech at Tsinghua University in Beijing on March 17, which he noted was intensifying since its formalisation . He observed that both the EU and China were global powers, both economically and in their search for regional and international stability. He touched on the new EU security strategy, which placed a priority on dealing with problems through effective multilateralism. He said he noted with particular satisfaction the Prime Minister’s reference before the National Peoples Congress recently indicating there has been too much unilateralism in 2003 and his undertaking that China would actively engage in multilateral diplomacy.

He also said he appreciated being updated by Chinese officials on the remarkable development of regional cooperation in East Asia and noted the Chinese involvement in UN peacekeeping missions in Congo and Sierra Leone.

And he underlined the Peoples Congress’ commitment to protect human rights and property rights, and said the EU would continue to offer assistance in these fields.