EU and China - laidi.com · The solar panel affair • The conflict started with a complaint against Chinese dumping of solar panels. European solar panel makers accused China of

EU and China

Zaki Laïdi

1(c) Zaki Laidi's teaching material

Session 9:

Outline

1. Hard facts on EU-China relations

2. The trading factor

3. EU-China relations beyond trade


Hard facts on EU-China relations

• EU and China are two systemic actors of the International System.

• A systemic actor is an actor whose actions and reactions affect the whole IS.

• EU-China relations have implications far beyond the two ensembles.


• A systemic relationship affects the whole IS in different ways.

• It affects the strategy or the calculations of other actors.

i.e.: if EU and China conclude an FTA, it will immediately affect US trade policy vis-à-vis China.


• It affects the outcome of global issues

i.e. : an EU-Chinese agreement on climate change will impact the outcome of the UNFCCC in a significant way.

i.e. : a German-Chinese alliance at the G20 blocked the attempt made by the US to impose norms on the reduction of current account deficits.

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EU objectives vis-à-vis China

• To remain one of China’s strongest partners in order to prevent a Sino-American condominium on global issues.

• To extend the scope of EU-China relations beyond economic ones.

• The capacity for the EU to emerge as a global actor is largely dependent upon its recognition by China as a full-fledged actor.


Chinese objectives vis-à-vis Europe

• Beyond trade, China tends to look at the EU as an ensemble of nation-states of different size, power and leverage.

• China tends to look at the EU through its relationship with Germany.


The trading factor

• The EU-Chinese relation is by far a trading relationship.

8

2000 2010

Exports (X) 26 113

Imports (M) 75 283

Balance -49 -169(c) Zaki Laidi's teaching material

9

Germany 48%

France 10%

Italy 8%

UK 8%

EU exports to China

Germany 22%

Netherlands 17%

UK 13%

Italy 10%

France 8%

EU imports from China

(c) Zaki Laidi's teaching material

• If the EU has a deficit in goods, it runs a limited surplus in services.

• China is the second EU trade partner behind the US.

• EU is the biggest Chinese trade partner.


• China is by far the biggest source of imports.

• China is for the EU the fastest growing export market.

This is a very important relation for both sides and not only for the EU.


• http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/


http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/�

http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/�

Exports of France by destination - 2011

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Source: Tresor Public

(c) Zaki Laidi's teaching material

The solar panel affair

• The conflict started with a complaint againstChinese dumping of solar panels. European solarpanel makers accused China of benefiting fromhuge state subsidies allowing them to dumpabout 21 billion euro’s worth of solar panels inEurope, putting European firms out of business.

• The EU Commission then planned to impose anti-dumping measures against China.


• This policy was largely supported by EUmember states with the exception of Germanywho opposed the plan because of its fear ofendangering the highly profitable Chinesemarket for German goods and services.

• The irony of the history is that the initialcomplaint came from a German firm. It endedup in a compromise under which China will beallowed to meet about half of Europe’s solarpanels.


• The two sides had agreed a minimum price forimported Chinese solar panels. Some industrialgroups who initially complained about Chinesedumping felt betrayed by this agreement whichstill hands over 70% the European solar market tothe Chinese.

• But on the other side firms who install solarenergy systems and who initially opposed anytarif against China felt relieved because they tookadvantage from cheap Chinese imports.


• The total added value of a solar panel is made oftwo main components, the solar panel itself(30%) and services aiming at installing the solarpanels (70%).

• This role revealed the diverging preferences of EUmember states and the increasing influenceplayed by Germany in shaping EU trade policy

• More than any other European country, Germanyis looking for outlets out of Europe where 90% ofthe global demand is now concentrated


• There is a strong convergence of interestbetween Germany and China which goes beyondstrict trade issues

• At the G20, Germany and China who run massivecurrent account surpluses opposed attemptsfrom the US to reduce them

• Germany and China also have unexpectedgeopolitical convergences of views on somesensitive international issues.


• During the Libyan crisis, China and Germany abstainedat the Security Council on Resolution 1973 aiming atusing force against Gaddafi forces.

• Two weeks after the beginning of the war in Libya, China and Germany launch ostensibly a bilteralstrategic dialogue in which they reaffirmed their strongsupport for a political solution to the crisis.

• This convergence was more or less repeated during the Syrien crisis during which both Germany and China opposed the idea of arming the Syrien rebelliion.


• China tends more and more to look at Europe througha German lens because of the importance of the German market for Chinese exports and because of the strategic value of German products on crucial areas for Chinese development.

- Protection of environment- New technologies on renewable energies- Electric vehicles- Services related to pensions and social security



• Two weaknesses and three irritants:

Weaknesses:

1) Trade in services in which the EU has a comparative advantage

2) Investments (trying to negotiate a bilateral treaty)

Irritants:

1) Industrial policies on NTB (non-tariff barriers)

2) Strong degree of government intervention (subsidies)

3) Inadequate protection and enforcement of IPRs.


• In managing its trade relation with China, the EU has three assets:

1) It is the largest market for Chinese exports.

2) There is a strong convergence of views and interests between the US and the EU vis-à-vis China (converging pressures)

3) The EU uses the WTO DSM to obtain Chinese enforcement of international trade regulations – uphold the “market economy” status.


EU strategy1st period: 2000-2006, obtaining full compliance

with the WTO. 2nd period: since 2006

The end of the moratorium on bilateraltreaties and the desire to make trade benefitsmore visible and tangible; the EU becamemore concerned by trade imbalances.

The failure of the Doha Round will reinforce the bilateral strategy of the EU.


EU-China relations beyond trade

• Two main issues:

1) Eurozone crisis

2) Global issues e.g. climate change


The Eurozone crisis

• China has a fundamental interest in seeing theEurozone crisis receding because the EU is itslargest client in the world.

• A depressed Europe depresses Chinese exportsand Chinese growth.

• China also has an interest in having the euro roleas global currency maintained and evenenhanced in order to prevent a full dominationof the dollar in the world economy


• During the economic crisis China increasedits reserve currencies in euro

• Chinese currency reserve in euro was raisedfrom 27% to 33% during the last two yearswhereas other large Central Banks tended toreduce them


• At the same time, China considers that the Eurozone crisis is a European crisis which needs to be handled by Europeans themselves.

• China takes advantage of the weakened Europe to obtain:

- ‘full market status’ before 2016.If obtained Europe will not be in a position to

use anti-dumping measures against China- the lifting of the arms embargo.


• The Eurozone crisis is seen as a new signal of the shifting balance of power in the world –which will reduce EU leverage on China.

• The paradoxical effect of the Eurozone crisis was a significant rise of Chinese investments in Europe and particularly in Southern Europe (Spain, Portugal, Greece)

• China contributed 10% of the IMF firewall of 430 billions. Japan offered 60 billions and India 10 billions.


The EU, China and Climate change

• In Copenhagen EU and China diverged over the fairness and economic feasibility of meeting a 2 degree Celsius trajectory

• EU and China diverge on the interpretation of historical responsibility

• China aims at reducing foreign interference in its domestic policy


There is large place for cooperation through :

- Technology transfer

- Carbon capture and storage

- Clean coal technologies

- Regulatory frameworks


• China acknowledges that every production and consumption are the prime causes of increasingly acute environmental problems in the country.

• China’s focus on clean energy will accelerate global decarbonization but presents a real source of competition for EU firms.


Documents

EU and China - laidi.com · The solar panel affair • The conflict started with a complaint against Chinese dumping of solar panels. European solar panel makers accused China of