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The High Level Economic & Trade Dialogue (HED) took place in Brussels on 7-8 May. The atmosphere was very good. But what was achieved?

The annual Dialogue was established in November 2007 by Commission President Jose Manuel Barroso and Chinese Premier Wen Jiabao, in order to address the imbalance in trade flows between the EU and China The broad remit of the HED is to examine the global trading system; strategic bilateral trade-related issues; investment; innovation, technology and IPR; and EU-China economic cooperation. The mechanism is to function as a complement and reinforcement to established EU-China dialogues.

The May meeting was led by Commissioner Catherine Ashton and Vice President Wang Qishan, and attended by 14 Commissioners and Director Generals from the European Commission and 12 Chinese Ministers and Vice Ministers.

According to the formal reporting, the HED called for an early and successful conclusion to the Doha Round, and pledged commitment to closer cooperation to keep trade and investment flowing in the economic downturn. The adherence of both the EU and China to the conclusions of the G20 summit in London, was reiterated, particularly highlighting the message that economic openness is vital to recover from the financial and economic crisis.

Commissioner Ashton stressed that there had been good discussions on trade and technology including intellectual property rights, customs cooperation and trade in food. The two sides also had good exchanges on climate change and energy issues, including the low carbon economy, energy efficiency and energy performance standards. Another focus was jointly supporting the growth and trade opportunities for Small and Medium-sized Enterprises (SMEs).

The following topics were also covered: trade, investment and competition; SMEs; customs cooperation; sustainable development including low carbon economy; energy; food safety and trade in food, consumer protection and product safety; healthcare; innovation and intellectual property rights; geographical indications; technology and information society; and transport.

Lots of talking in a good atmosphere, but what decisions were taken? What was the effect of the meeting on the overall bilateral relationship?

Wang Qishan wrote an op-ed in the International Herald Tribune published on 5 May:

“The economies of China and the E.U. have much to offer each other and our two-way trade holds a huge potential.

China and the E.U. should make full use of the platform presented by the high-level economic dialogue to strengthen communication and cooperation and jointly oppose trade protectionism.”

From a Chinese perspective, the Dialogue was therefore successful. There was lots of communication, although little interaction, as both sides were effectively only stating prepared positions. There was agreement to fight protectionism. The trade deficit per se not the problem, but perception can trigger protectionism.

The EU’s biggest concern is market access but this was not seriously addressed, as the Chinese did not believe that HED is the right platform. From a European standpoint there was no progress on substance.

Although there are active negotiations for a Partnership & Cooperation Agreement (PCA), there has been no progress in the trade negotiations. China merely seeks a revision of the 1985 Agreement but the EU wants a new agreement. Although the EU has been insisting on a single trade and non-trade agreement, it now seems likely that a separate PCA will be signed.

The state domination of the Chinese economy inevitably prevents a level playing field, as it produces distortions, such as subsidies and excess capacity: Foreigners are excluded from entire sectors – those that are regarded as strategic, which has a wide meaning in China. Worryingly, Beijing regards wind power generation as a strategic sector. All this having been said, it should be remembered that the Chinese market is much more open than was the Japanese one at the present stage of development.

Climate change is an area in which there are hopes of close cooperation. However, there is the serious obstacle of technology transfer. On the one hand China understandably needs the necessary technology but, on the other hand, companies need intellectual property (IP) protection, which is insufficient.

There is therefore frustration in Europe over both increased market access and insufficient IP protection, a feeling shared with the Americans. At the same time, greater Chinese assertiveness is being observed.

It is not possible therefore, to take an optimistic view of the trade relationship. At least a friendly atmosphere is being maintained, and this is a good thing in itself. However, it is important to remember that EU-China trade is not a zero sum game. China may be the greater beneficiary but the EU is also substantially benefiting.

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  1. A move away from divisive bilateralism was recommended by a G20 working group in London a few weeks ago.

    This coincides with an implicit acknowledgement by the United Nations that its key agency – the IMF – failed to control the global economy as the UN Charter intended. The UN asks for a second chance and recommends instead a new ‘Global Economic Council’. The council would ambitiously oversee the global financial system, improve coordination of global economic policies, introduce a new global reserve system to replace the dollar-based one, reform governance of the World Bank and IMF, introduce a sovereign debt resolution mechanism, and generally improve regulation.

    Should we keep the United Nations?

    [WORDPRESS HASHCASH] The poster sent us ‘1055386704 which is not a hashcash value.

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