Toespraak eurocommissaris De Gucht over handelsrelatie EU-China (en)

Sir David,

Mr Davies,

Ladies and gentlemen,

Let me start by saying that I am very glad to be in London today. As well as being the home of free trade for more than two hundred years, the United Kingdom is at the heart of European trade policy today.

Exports of goods and services by British companies are worth more than 250 billion euro - just under 15% of all exports from the European Union. And Secretary of State Cable, Minister Lamb, and Lord Green are at the vanguard of Member States in pushing for the new trade deals that are essential for prosperity across Europe.

More precisely, I am also very glad to be here with you, the members of the China Association and the China Britain Business Council.

I know your work is highly valued by the British business community but I also know that you work in close cooperation with organisations from other European countries. And I know that those bonds help you achieve a shared objective - growing the European economy through trade and investment.

That kind of cooperation, based on mutual interest and pragmatism, is what I want to focus on in my remarks today.

Because I think it is a good description of the kind of relationship that the European Union needs to have with all of our trade and investment partners.

And it is a very good description of how we should view our relationship with China.

That relationship is already strong. The speed of its expansion over the last thirty years is nothing short of breath-taking. Our trade has grown from 4 billion euro a year in 1978 to almost 430 billion last year. Europe is now China's largest trading partner and China our second largest.

But we have a mutual interest in making this relationship even stronger because we are both going through moments of transition.

China's first wave of growth was driven to a great extent by the abundance of low-cost labour. But the Chinese leadership knows that new skills will be needed to avoid the middle income trap and to facilitate the move to the next stage of economic development.

If China is to meet the increasing aspirations of its people, its companies need to move consistently up the value chain. This is already happening, in sectors like heavy machinery and renewable energy. But creating a truly innovative economy will require deeper changes.

This is an area where the European Union has enormous expertise:

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  with our large number of globally competitive high-tech firms, many of whom are represented here today;
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  and with our ability of designing a policy environment that supports their creativity.

Europe is also in a period of transition. We must make sure that we will emerge on the other side of the current crisis as a changed Union, stronger and better able to compete. In any event, we will not make our way through the crisis on austerity alone. We will need growth.

International trade and investment, with important partners like China, are among the best ways we have to deliver that growth. This year, the revenues from our exports should keep the European economy from slipping back into recession. In future, we expect that 90% of all growth in the world economy will occur outside Europe's borders - one third of it in China alone.

That means that Europe has a strong long-term interest in deeper economic engagement with China.

To that effect, we already have a broad set of political and economic dialogues at the European level. We have an annual EU-China Summit and a High Level Economic Dialogue that I co-chair - together with Vice Presidents Rehn and Almunia for the European Union and with Vice Premier Wang Qishan on the other side.

But while the architecture of the relationship is already strong I believe that we can strengthen it further by being more pragmatic in our approach to each other.

On the European side, I think there is too much emphasis on fear in our discourse about China. This is seriously misguided in my view.

Take investment: Questions are too often raised about Chinese acquisitions of European firms. Just because a food or utility company is owned by a Chinese firm doesn't mean it can avoid European or national legislation.

Quite frankly, Europe should be welcoming these acquisitions because we need the cash injection right now. Let us not forget that the great post-war European boom was built with the support of massive foreign direct investment - from the United States. Also, this is the best way of recycling China's trade surplus in the global economy.

On top of a tendency to exaggerate the downsides of our relationship with China, we also have a tendency as Europeans to underestimate our own strengths. Even in these times of crisis we remain the world's largest exporter and importer of goods and services, the largest source and one of the largest hosts of foreign direct investment.

So we should avoid fear to cloud our judgement and be much more pragmatic in our engagement with China.

That means that we should appreciate the benefits. But it also means that we should express ourselves where we have concerns about specific Chinese policies. For instance, the role of state-owned enterprises and subsidisation at the core of the Chinese economy is something we are looking at very closely. We have also been very clear with our Chinese counterparts that we do not appreciate their use of threats and intimidation towards our companies behind the scenes to prevent them coming forward with clearly justified trade defence or WTO cases against China.

On the Chinese side, I believe there is also room for a more pragmatic approach. For example, China surely understands that the mood of many of our citizens about market opening has become more anxious. This is leading to pressure on governments for protectionist actions.

I would very much like to avoid that. But it is much easier to convince people that we need to remain open when it is clear that we are all playing by the same rules. The barriers that many European companies face in exporting to and operating in the Chinese market raise questions in people's minds about whether that is the case.

Trade openness needs to be a two-way street for the Commission to be able to continue to defend it in Europe. In my view, the pragmatic solution would be for China to help defuse tensions here by moving forward with reforms at home.

If we approach the relationship in this sense - trying to cooperate based on mutual interest and pragmatism - while having frank discussions on problematic issues - the prospects of strengthening it are considerable.

In practice, this means operating on several tracks.

Obviously, we need a track to deal with the areas of concern for both sides. Clear communication also on difficult issues ought to be part of any healthy and mature partnership.

At the moment there are a number of those on the agenda.

First, raw materials. This year we scored a major victory at the World Trade Organisation on China's anti-competitive policies on certain raw materials. At the end of June we have requested a ruling on a new case on the similar issue of rare earths, vital components for the electronic and renewable energy industries.

Second, public procurement. Today the European procurement market is wide open. That is to the benefit of European consumers and taxpayers. But many of our trading partners' markets, including China's, are largely shut to our exports. For this reason we have proposed legislation in this area that will strengthen our ability to persuade our partners to open their markets. We hope it will contribute to reform in China too.

Third, trade defence. As you know, we have a European system that allows us to take action against economic operators who engage in unfair trade practices. We have not hesitated and will not hesitate to take action where there is a legitimate case to be made to defend European producers, many of them British.

But while we do need to deal maturely with our differences, we cannot allow the relationship to be defined by them. It is too important for that.

That is why we need to keep the difficult issues on their own track and establish separate, parallel tracks to implement an agenda for long-term, forward-looking cooperation.

The first of these should deal with investment. Current two-way investment flows are simply too low for a partnership between two of the world's largest economies.

China's stocks still only account for less than a half per cent of total foreign direct investment in Europe (0.2%). To give you a comparison, American investments here make up 21% of the total. In the other direction, Europe's investments in China add up to less than 2% of our total FDI stocks abroad compared with nearly 30% in the United States.

But this will very likely change. A recent study predicts that China may make up to 1.6 trillion euros worth of new investments abroad between 2010 and 2020, and Europe is currently its main target. European investment in China also has potential to increase.

So we need to make sure the conditions are right. That is why we agreed to move towards the launch of negotiations for a broad agreement on investment at our last summit in February.

Concretely, the agreement would deliver a number of useful results.

From China's perspective it would mean consolidating all of its current 25 bilateral investment agreements with European Member States into a single framework.

From a European perspective it should help to improve access to the Chinese market for investors. It would also help provide a level playing field for companies, regardless of their ownership structure or origin, in both Europe and China.

We need to move ahead with this negotiation as soon as possible.

A second area where we can work constructively is export credits. Export credits are vital for the financing of international trade and China is one of the most important emerging providers. However, China is not a participant to the OECD's arrangement on officially supported export credits.

So we are very pleased that China has recently agreed to work on international guidelines in this area with the objective of concluding a new agreement on the matter by 2014. Establishing a level playing field through such an agreement with the participation of both OECD Members and BRICS would help everybody to avoid a ruinous race to the bottom on the conditions for export finance.

It would also send a very important signal that all major providers of export credits share the goal of keeping international trade open and fair.

The EU has an interest in lending its full support to this multilateral process, including through developing a bilateral dialogue with China on export credits between the Commission and the Chinese government. In May this year in our annual Joint Committee meeting, I have agreed with Minister Chen to set up such a dialogue in parallel to the multilateral initiative. As I have mentioned before - I am convinced that our companies do not need protecting, but they do need to be able to compete on a level playing field.

The final track should be on global trade issues. China and the European Union are world leaders in international trade. We also both benefit from the global rules for open trade that are underwritten by the World Trade Organisation.

Unfortunately, much of our agenda at the WTO is currently on hold. This is especially regrettable for services liberalisation. Because in important areas like banking, telecommunications, construction and professional services China is keeping its cards close to its chest. This means it has been unwilling to significantly open up outside the WTO context as well.

However, there are a number of issues where progress is being made in Geneva. The most important of these is trade facilitation - which is about simplifying customs procedures to smooth the flow of goods across borders. I think that Europe and China have a great deal of shared interest in this area and I hope we can work closely to move it forward.

Ladies and Gentlemen,

This type of agenda allows us to cooperate closely while managing our differences. It will, I believe, help us to build a more solid and mutually beneficial relationship with the rising economic power in the east.

But it will only be successful if both sides operate coherently and consistently.

In Europe, this is more easily said than done. Too often we witness different messages being passed on partners like China by our Member States in their bilateral contacts, and this naturally reduces our overall leverage to get our common interests addressed.

But we have nonetheless been successful in many fields. So I have confidence that if we work together - business and government, Member States and the Commission - we can remain successful. Unity will help Europe to live up to its potential as a strong partner for China on the international stage.

Let us move forward together.

Thank you very much for your attention.