Brussels and Washington’s trade imbalance with China

When it comes to dealing with the rise of China it seems Europeans are from Venus and Americans from Mars. The popular phrase of Robert Kagan, the US commentator, appears more apt than ever when talking of the rise of the potential Asian superpower.

The US has acted decisively twice in recent weeks to try to force open the doors to the workshop of the world – to a predictable howl of outrage from Beijing. For the time being, the European Union is prepared to watch from the sidelines – and perhaps even benefit as US-China relations degenerate.

Five years after it entered the World Trade Organisation, the US feels China has not lived up to its obligations. Piracy is still rampant and too many ailing state enterprises are being propped up with subsidies, Washington says.

Washington has also defined the cheap loans given to some industries as trade distorting subsidies, opening the way for action in a raft of areas.

For Peter Mandelson, the EU trade commissioner, the glass is half-full rather than half-empty. Last October he produced a paper claiming that China’s rise had benefited the EU. While acknowledging the losses from piracy it said a growing middle class would devour luxury goods of the type at which Europe excels: Italian clothes, French perfume, Scottish whisky.

A study released in February said that the Chinese market for such luxuries would hit 1,000bn euros by 2010. That dwarfs the 21.4bn euros cost of non-tariff barriers and the 20 per cent of sales machinery companies say they lose to the copycats.

Mr Mandelson also has less room for manoeuvre that the White House in dealing with them. After all, he had a bloody battle last year to get anti-dumping duties on leather footwear for just two years. The usual period is five.

Still the two trade superpowers are co-operating on intellectual property enforcement and Mr Mandelson has said he will defend producers’ interests where necessary. US assistant trade representative Tim Stratford was in Brussels for talks with his counterparts just days week before the announcements.

Much of the difference stems from the wider, non-trade relationship. For the US, China poses a challenge on many fronts. It threatens not just jobs but the US’s military dominance. It menaces Taiwan, a key US ally. The EU, rather, sees it as a potential partner. France in particular welcomes a counterbalance to US dominance. The EU would rather tie it down into arrangements such as Asean, which echo its own creation to subsume its regional bully, Germany.

US officials also see the benefits of greater Chinese consumption but have a hard time selling them at home in an atmosphere whipped up by a long history of suspicion. Paranoia about the “Yellow Peril” goes back to the time when Chinese labourers arrived to build the railways. The Chinese Exclusion Act limiting immigration to just a few hundred Chinese a year dates back to 1882. Mix in fears over globalisation and security and you have a potent, and possibly toxic, brew.