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backCHINAtalk March, 2012

Chinese ministry warns of EU trade probes

Possible investigation into Chinese imports 'a violation of WTO rules'

The European Union will violate World Trade Organization rules if it investigates Chinese imports without first receiving complaints from European companies, the Ministry of Commerce said on Friday.

The European Commission, the EU body charged with investigating trade complaints, is considering charging duties on made-in-China products to offset subsidies that some allege have been used to make those goods cheaper.

The agency said it believes European companies are hesitating to ask the EU to take protective measures out of a fear that China will retaliate against their business interests, according to a Wall Street Journal report.

Karel De Gucht, EU trade commissioner, was quoted by the media as saying, "We are following a number of cases and considering whether or not we should take action" against China "to protect the European interest".

Zhang Xiangchen, director-general of the Ministry of Commerce's department of policy research, said the ministry is opposed to the EU proposal and will keep a close eye on its development.

"It sounds unreasonable since, under the WTO, no country or region can start investigations unless domestic companies lodge appeals in a majority of cases," Zhang said.

"If that were done, it would go against the rules of the global trade arbiter."

The European Commission has never started a trade investigation without first receiving a complaint from European companies.

The Wall Street Journal's report said the telecommunications industry is likely to be targeted in one of the commission's investigations.

"While the eurozone's economy is still blurred, China has to be highly alert to the new tendency toward trade protectionism in the region," said Li Gang, a researcher studying European economic issues at the Chinese Academy of International Trade and Economic Cooperation, which is affiliated with the ministry.

In 2011, the EU initiated 5 trade remedy cases against Chinese imports.

Trade frictions between China and the EU have intensified recently.

This month, the EU joined the United States and Japan to go to the WTO with questions about the quotas China places on exports of rare earths, the 17 elements used in a variety of high-tech industries.

The European Commission proposed this week to revise its government procurement agreement, which is meant to give companies from all countries an equal chance of winning government contracts. The proposed change would bar companies in certain countries, including China, from benefiting from that agreement.

"The EU will be more aggressive in protecting its own business interests by targeting China," Li said.

The EU is China's largest trade partner and also a large source of technology for China.

"Despite the fairly good foundation, economic and trade relations will be twisted and bumpy this year," Li said.

The European Commission lowered its growth forecast for the European economy to 0.6 percent this year, down from the previous forecast of 1.9 percent. "There is little possibility that the European economy will enter into a big recession, but the region's growth will probably slow this year," said Zhang Yuyan, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

The EU's foreign direct investment has slowed down from the second half of last year. In 2011, the amount of investments stemming from the EU dropped by 3.65 percent year-on-year.

Source: China Daily - GAI

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