EU Signals New Trade Tool To Coerce China

By Andrew Willis

Europe's top trade official has signaled his intention to create a new retaliatory trade tool, amid ongoing complaints from European businesses that they are being excluded from Chinese public contracts.

Unveiling a five-year plan for EU trade policy in Brussels on Tuesday (9 November), trade commissioner Karel de Gucht said he would come forward with legislation next summer to ensure that the openness of European government contracts was reciprocated overseas.

"We need to help European businesses of all sizes to access global markets," Mr de Gucht told journalists. "Where the EU is open, such as in public procurement, we need to ensure European businesses can benefit from the same terms of access to our partner's markets."

Beijing insists its list of regulatory requirements regarding eligibility for Chinese public contracts is not designed to exclude foreign companies, but European businesses say they are being unfairly treated.

At the same time, road-building schemes in Poland and Germany have attracted anger after Chinese investors successfully undercut competitors.

Mr de Gucht said Europe would limit its future retaliation to the specific sectors being effected. "I don't believe that bluntly closing our procurement markets would be a good idea," he said. "It should be sectoral, specific and aimed at practices that we cannot accept from [countries beyond the EU]."

The issue of public contracts for businesses has grown in importance following last year's global downturn and the subsequent raft of government stimulus programmes designed to boost growth. China's rapidly expanding economy and its most recent $586 billion stimulus package make it an enticing prospect for international firms, while Beijing has sought to boost "indigenous innovation".
"Buy American" provisions in US stimulus packages have also attracted European criticism as policymakers continue to warn against rising protectionism as a solution to the tough economic times.

The new tool, which will need member state and European Parliament approval, will expand the EU's trade defense arsenal from its current reliance on anti-dumping measures. Even if China were a signatory to the WTO's 1996 Government Procurement Agreement, critics say it lacks teeth.
New EU trade policy

As part of its new trade policy, Mr de Gucht indicated that Europe would pursue a tougher line of approach over the next five years, increasing the number of cases it took to the WTO and pushing hard for new bilateral trade deals with India and south-east Asian states.

The 23-page blueprint also says that completing the Doha round of multi-lateral trade talks is a top priority for the EU, by the end of 2011 "at the latest".

The talks began in 2001 with the primary aim of dismantling obstacles to trade for poor nations, but discussions stalled in 2008 amid acrimony over EU and US unwillingness to reduce farm subsidies and the extent to which countries such as India and China should lower import tariffs.

European business umbrella group Eurochambres welcomed the goals of the EU's new trade strategy, but questioned the lack of detail on how they will be implemented.

"The commission's strategy confirms the need for a stronger EU economic diplomacy," said the group's secretary-general, Arnaldo Abruzzini. "We now expect to see the link between goals and instruments to be clarified in the Small Business Act's review, due in December."

Critics said the policy would continue to create economic upheaval, hurt the world's poor and damage the environment. "The policy proposals ... show that the EU has not changed course in response to the [economic] crises and is still in complete denial," said Bruno Ciccaglione, co-ordinator of the Seattle to Brussels Network (S2B).

The coalition of 70 European trade activist groups and civil society organisations called on the commission to comply with articles under the Lisbon Treaty that define the achievement of the Millennium Development Goals and poverty reduction as over-arching foreign policy goals.