China

EU trade chief Karel De Gucht speaks at a press conference in Beijing in 2011

While almost everyone in Brussels was asleep last night – except EU foreign ministers fighting about Syria– the Chinese delegation to the EU put out what can only be described as its toughest response yet to the burgeoning trade dispute between Brussels and Beijing.

The statement, which we’ve posted in its entirety here, came after China’s trade representative Zhong Shan met in Brussels yesterday with the EU’s trade chief, Karel De Gucht, in a last-ditch attempt to head off two trade cases that are among the biggest and most politically radioactive the European Commission has ever attempted: punitive tariffs against Chinese solar panel imports and an anti-dumping investigation of Chinese telecommunications equipment.

In the statement, the Chinese delegation is pretty blunt: If De Gucht moves forward with the cases, there will be retaliation – and that retaliation could lead to a full-blown trade war:

If the EU were to impose provisional anti-dumping duties on Chinese solar panels and to initiate an ex-officio case on Chinese wireless communications networks, the Chinese government would not sit on the sideline but would rather take necessary steps to defend its national interest. Despite the heightened risk of the China-EU bilateral trade dispute widening and escalating, the Chinese government would nevertheless make a best effort for hope of reaching a consensus and avoiding a trade war, but this would require restraint and cooperation on the EU’s part.

 

China’s solar panel manufacturers are facing an uphill battle in their legal fight against the EU, which last week targeted them as it launched the bloc’s biggest-ever an anti-dumping investigation. The case involves Chinese exports of solar panels, wafers and other products that totalled some €21bn last year.

More than half of such anti-dumping investigations result in tariffs being imposed, according to EU officials. Yet there are at least two technical factors at work in the solar dispute that could make the odds even worse for the Chinese. 

It’s been something of a rough week for European relations with China after the Spanish government erroneously put out word that Beijing was preparing to invest €9bn in its struggling savings bank. Chalk it up to an over-eager translation of Chinese intentions. 

Timothy Geithner, the US treasury secretary, made headlines Wednesday after he warned of the potential for a currency war – or, to be more precise, a “competitive non-appreciation” – if China did not allow the renminbi to appreciate more freely.

What was less noticed in his address was some equally tough talk for Europe, where he seems to see a danger of continent-wide austerity measures stifling the nascent global economic rebound. 

There was a common reaction that Chinese premiere Wen Jiabao and his entourage inspired as they swept through Brussels this week: Impressive. That word was uttered repeatedly by European business leaders, policymakers and diplomats on the sidelines of an EU-China Summit. At times, it seemed the Chinese were in motion while the natives stood still, watching with awe and envy as someone else’s national ascent played out.

Things were very different a decade ago, when an Asian banking crisis was raging. Now, in the midst of its own crisis, Europe is the one short of cash, humbly thanking Mr Wen for his promise to buy government bonds issued by Greece and other debt-plagued governments. That gesture has made it particularly awkward for European leaders to press demands that Beijing revalue its currency. 

It was buried amid the excitement of the European Union’s summit in Brussels, but I’d like to draw your attention to a revealing report published on Thursday on the subject of European access to strategic raw materials.  Prepared under the supervision of the European Commission, the report names 14 critical materials that Europe risks not having enough of in the future – with potentially far-reaching implications for Europe’s economic development, not to mention its defence and security. 

The biggest fights at European Union summits are usually about money.  It’s no different this time.  At their final summit of 2009, the EU’s 27 national leaders have been wrestling in Brussels with the question of what contributions each country should make to a “fast-start” fund to help developing countries address climate change.

It looks as if EU governments will come up with an offer of about €2bn a year – much of it coming from rich countries such as France, Sweden and the UK - for the three-year period of 2010 to 2012.  “Anything above €2bn will be an impressive offer,” European Commission president José Manuel Barroso said this morning. 

Everyone interested in modern Russia should read a report out this week on the nation’s deepening demographic crisis.  It’s published by the United Nations Development Programme, but it’s written by a team of Russian academic experts, so no one can say it’s tainted with bias.

The report describes the stark reality of a country whose population is falling fast, to a considerable extent because of rampant alcohol abuse among men, who on average are dying before they make it to 60 years old.  “Short life expectancy is the main feature of this crisis, though by no means its only feature.  The birth rate is too low, the population is shrinking and ageing, and Russia is on the threshold of rapid loss of able-bodied population, which will be accompanied by a growing demographic burden per able-bodied individual.  The number of potential mothers is starting to decline and the country needs to host large flows of immigrants,” the report says. 

In December 1984 western governments detected the first signs of potentially far-reaching change in the Soviet Union when Mikhail Gorbachev, three months before he took over as Communist party leader, went on a trip to London.  Gorbachev greatly impressed Margaret Thatcher, the then prime minister, who saw him as an articulate, vigorous man with whom, famously, she could “do business”.

Is a Gorbachev moment about to happen in European-Chinese relations?  In two weeks’ time, Xi Jinping, China’s vice-president, is due to pay a visit to Europe and, among other activities, spend some time at the European Commission in Brussels.  The parallels with December 1984 are intriguing. 

Since February 1999, when the Organisation for Economic Co-operation and Development’s anti-bribery convention came into force - with the aim of reducing bribery of foreign officials in international business deals - the US has brought 103 cases, Germany more than 40, France 19 and the UK just one.  So says “Global Corruption Report 2009: Corruption and the Private Sector”, a study published on Wednesday by Transparency International, the anti-corruption watchdog.

From a British point of view, the report makes uncomfortable reading.  “UK companies still have a long way to go to increase their awareness and adopt robust anti-bribery compliance programmes,” it says.