EU-Chinese Trade Relations

Table of Contents

List of graphics

List of tables

List of abbreviations

1. Introduction

2. EU and China
2.1. General Facts
2.2. Geography and History
2.3. Economy

3. EU-Chinese Trade
3.1. History
3.2. Trade Statistics

4. Special Trade Issues
4.1. Technological Cooperation
4.2. Textile Conflict
4.3. Intellectual Property Rights

5. Conclusion

Bibliography

List of graphics

Graphic 1: Map China

Graphic 2: Map EU

Graphic 3: EU-China trade

Graphic 4: EU imports from China, by product grouping

Graphic 5: EU exports to China, by product grouping

Graphic 6: EU trade in services with China

Graphic 7: EU-China FDI

List of tables

Table 1: General Facts

Table 2: Economic Facts

List of abbreviations

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1. Introduction

This paper is the final paper for the course Chinese Foreign Trade. The EU-Chinese trade relations are a very important aspect of today’s world economy and are expected to even increase in future. These trade relations are equally important for both sides and will have a strong impact on the future of both parts. This importance convinced me to choose this topic.

First of all, chapter 2 gives a summary of the most important aspects of trade-related statistics about China and the EU to give an overview of the two parties. In chapter 3, the most essential trade statistics will be presented. Before ending with an overall conclusion, chapter 4 will deal with some special trade issues of importance.

2. EU and China

This chapter gives an overview of the most important statistics about EU and China, which are relevant for trade.

2.1. General Facts

First of all, let’s take a look at some statistics to compare the two countries. China has with its 9.5 billions sq km more than double the size of the EU and with 1.3 billion people almost three times more inhabitants than EU. The average Chinese inhabitant is much younger than in the EU and despite of the one-child policy China is growing more rapid than EU.

The average European citizen lives six years longer than the average Chinese one. Especially with the life expectancy of women there are huge differences. The two most important politicians in China are President Hu Jintao and Prime Minister Wen Jiabao, while the most important EU-politician is Jose Durao Barroso, the head of the EU commission.

Table 1: General Facts

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Source: Own table using data from CIA Worldfact Book (2006)

2.2. Geography and History

China is an Eastern Asia country, bordering to several countries. The People’s Republic of China was founded on 1 October 1949. After the reforms of Deng Xiaoping, commencing in the year 1978, China opened to the world and has become an important power in the global world.

Graphic 1: Map China

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Source: CIA Worldfact Book (2006)

The European Union is located in Europe, consisting of 25 independent countries. This means that the EU is no country; it is a federation of independent countries. However, the EU is much more than just a free-trade association such as ASEAN, NAFTA or Mercosur. It has some characteristics of independent nations such as its own flag, anthem and currency. In addition, the member countries gave some legislation power to the EU. About 70 per cent of all laws in Germany are based on decisions of the European Union. The EU was founded after World War II in 1951 and grew from six to now 25 member states.

The EU consists of the following countries:

Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and United Kingdom.

In addition, Bulgaria and Romania will join the EU in 2007 and Croatia, Macedonia and Turkey have the status of a candidate country.

Graphic 2: Map EU

illustration not visible in this excerpt

Source: CIA Worldfact Book (2006)

2.3. Economy

This section deals with some economic statistics. China’s GDP at purchasing power parity is about 8.9 trillion Dollars, while EU’s GDP is about 12.2 trillion Dollars. However, China is growing faster than the EU, 10% compared with about 2% in EU. Comparing the GDP per capita, Europeans can buy four times more than Chinese. There are also huge differences in the economic sectors. While in China the industry sector is really big, the European service sector contributes to about 70% of the GDP. This is an important factor because it shows that Chinese and European economy is focusing on different areas. While EU focuses on services, China is focusing on manufacturing.

The inflation rate is quite low in both countries at about 2%. China has a lot more workers in the labour force, and the unemployment rates in the EU and Chinese cities are almost the same. However, in rural Chinese areas unemployment is estimated to be very high.

Table 2: Economic Facts

illustration not visible in this excerpt

Source: Own table using data from CIA Worldfact Book (2006)

3. EU-Chinese Trade

According to Eurostat EU-China trade reached about € 210 billion in 2005. This means that China remained the 2nd biggest trading partner for the EU after the USA and that EU is China’s largest trading partner. The EU-China trade relation is characterized by a huge EU trade deficit, reaching about € 106 billion in 2005. This is the EU’s biggest trade deficit with a single country. The EU strongly supported China’s accession to the WTO, as it improved access for EU companies to China’s market. Import restrictions were reduced and some sectors were opened to foreign investors.

The next point deals with the history of EU-Chinese relations, followed by dealing with the current situation in more detail using some trade statistics.

3.1. History

In 1975 diplomatic relations between EU and China were established. 10 years later, a trade and co-operation agreement was signed.

In 1995 the first European strategy paper towards China was published. It says that the time has come to redefine the EU’s relationship with China. Europe must develop long-term relationship with China that reflects China’s worldwide, as well as regional, economic and political influence. It stresses the importance of that partnership for both sides.

Several other papers followed this first one. Now the aim is to create a strategic partnership with China. The major aims are:

- Engaging China further in the international community
- Integrating China better in the world economy
- Raising the profile and visibility of EU in China.

As a result of the emerging partnership annual EU-China summits have been held since 1998.

In 2001 China admitted the WTO, after 15 years of negotiations. From that date on China had to open its markets to goods and services from other members, but also increased its export opportunities. China took this opportunity and so China now has a huge trade surplus with the EU.

In 2003 China released its first strategy paper towards the EU. China sees the EU as an important power in the world. There are no major conflicts between China and EU; they are no threat to each other. Especially trade and economic cooperation should be intensified.

An important part of the EU-China relations is co-operation in high-technology. China for example contributes money to the Galileo-project. At the 7th Annual EU-China Summit 2004 the European Union and China further strengthened their strategic partnership. That year was the year of Europe in China. This led to lots of contacts with China, including PM Wen’s visit to Brussels. A R&D co-operation on the peaceful use of nuclear energy between Euratom and China has been launched.

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