Trade between EU and China: still a long way to go

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Chinese president visits four nations in 11 days.

At the beginning of this month, Chinese President Xi Jinping has just returned to Beijing after wrapping up his 11-day, four-nation tour to Europe. It was the president’s first trip to Europe since taking office and during this trip President Xi laid out some ambitious goals for bilateral trade between China and the EU. A number of business deals were signed, including an order for 70 planes worth over 10 billion euros with France’s Airbus, and a one-billion euro deal for the German car company Daimler to expand its presence in China.

As trade was one of the focuses of Xi’s European trip, trade fights between China and EU have always been a heated issue.

On March 21, 2014, Chinese and European Union officials announced that a cooperation agreement between the two countries’ respective wine industries has ended China’s investigation into EU wine imports showing that the trade relations between the two powers are on the mend. The settlement of China’s anti-dumping and countervailing duty investigation of EU wine comes on the heels of the government’s recent decision to close a similar probe of EU solar-grade polysilicon.

The conflict took place one year ago when the EU imposed tariffs of 11.8% on imports of Chinese solar panels, solar cells and silicon wafers after launching an investigation into whether Chinese producers sold products at below-cost prices in June. Those tariffs would continually increase two months later and could reach as high as 47.6% — the amount initially threatened by the EC and a level that would effectively lock Chinese players out of the EU market.

In terms of import value affected, it is the most significant anti-dumping complaint the European Commission has received so far (in 2011, China exported solar panels and their key components worth around €21 billion to the EU).

The tariffs threatened billions of dollars of Chinese solar-product imports and also the livelihood of European companies that installed solar panels, which had benefited from a sharp decline in solar-panel prices. While the move would help European solar panel manufacturers, fears came that it could also hurt overall business in Europe, including installers and polysilicon producers that sell to Chinese panel makers. For instance, The Alliance for Affordable Solar Energy (AFASE) had warned that anti-dumping duties would have a detrimental effect on Europe’s solar industry and cost up to 250,000 jobs throughout the EU.

Right after that, China’s Ministry of Commerce launched the investigation of EU wine imports in July, seeking to ascertain whether the 28-nation bloc’s wine products were being sold in China at below-market prices or benefiting from unruly government subsidies.

That announcement came a day after the European Commission said that it was imposing tariffs on Chinese producers of solar panels, which, the Commission said, had been selling their products at below price. It is obvious that the Chinese investigation into whether EU member countries sold wine in China at below-cost prices was clearly linked to the solar-panel trade dispute.

Last month, the wine dispute was settled just a day before Chinese President Xi Jinping’s depart on trip to EU. President Xi also mentioned during his European visit that trade remedy need to be applied with caution.As we know, protectionism is fundamentally negative for the business. After all, a trade war is one thing that both sides are unwilling to see.

 

Sources:

http://trade.ec.europa.eu/doclib/press/index.cfm?id=829

http://www.europeanvoice.com/article/2013/july/china-investigating-eu-wine/77728.aspx

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