The EU Trade Policy Towards China

Designing its trade policy towards China, Europe should exert extreme foresightedness. Rather than to be trapped in bilateral trade balance conflicts (economically meaningless and politically hopeless), the EU should push for objectives that are attractive to its own interests, and to Chinese interests – China’s economy is already too large to be influenced exclusively from outside. In this perspective, the paper offers five main proposals. • Concerning trade in goods, the EU should aim at a ‘joint better enforcement’ of China’s WTO Accession Protocol – granting China the market economy status in antidumping investigation while getting from China clarification, confirmation, and other marginal improvements of its tariff schedule as back. • The EU should narrow down its requests on intellectual property rights to limited range, which deliver true innovations and benefits to both European producers and Chinese consumers. • The EU should focus on services and foreign investment, by proposing an early and progressive elimination of the special safeguard instrument against Chinese exporters in exchange for additional commitments from China in services and investment. • The EU should re-focus its trade policy on the WTO, away from bilateral trade agreements. Such agreements amplify incentives among Asian countries to negotiate bilaterals between themselves, by the same token risking further marginalizing the EU. And they tend to segment even more the Chinese provincial markets, while the WTO approach would reinforce the emerging ‘Chinese Single Market’. • Improving the functioning of its domestic markets would make the EU more resistant to the increasing size of the Chinese economy, for instance, in the energy or financial sectors. Such an ambitious program has no chance to succeed if it does not fill two conditions. First, it should keep a clear economic focus. Trade negotiators are not credible when they tackle political issues. Second, the EU should work with other players in the world. As such cooperation should not be perceived by China as an aggressive coalition, it should involve a notable group of countries. It is thus important for the EU to go beyond the US and Japan, and to ensure the participation of medium-size countries in this cooperation. A key benefit of the presence of such medium-size countries is that they are often among the best ones in terms of governance – the great challenge faced by China, and consequently, by the entire world.