EU, China leaders agree to avoid protectionism

Reuters News
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Posted: Sep 20, 2012 1:23 PM
EU, China leaders agree to avoid protectionism

By Ethan Bilby and Kevin Yao

BRUSSELS (Reuters) - European Union and Chinese leaders agreed on Thursday to avoid trade protectionist measures, following months of increasing tensions, with China undertaking to continue investing in European debt.

At the 15th summit between the world's largest trading bloc and China, the second largest economy, Premier Wen Jiabao played down disputes with Europe over Beijing's export policies and trade practices.

"We both follow free and open economic and trade policies, reject trade protectionism and work to advance economic globalization," Wen told a business conference on the sidelines of the summit.

Trade between the two has doubled over the past eight years. But recently there have been disagreements, including the European Commission's accusation earlier this month that China had been selling solar panels below cost in the EU.

The Chinese leader said he believed Europe would be able to overcome its debt crisis and that China would continue to play a role by investing in European debt.

"In recent months, China has been continuing to invest in the euro zone government bonds and bonds issued by the European Financial Stability Facility (EFSF)," he said.

"Europe is one of the main markets for China to invest its foreign exchange reserves and China will continue to participate in efforts to tackle Europe's debt crisis through appropriate channels."

China is also in talks on making other investments, Wen said. China's foreign exchange reserves are the world's largest at $3.24 trillion and economists say roughly a quarter of that consists of euro-denominated assets.

Wen told the forum that China's economy would stabilize as policy measures gain traction and that it was on track to meet its annual economic growth target.

Beijing has set a 7.5 percent target for economic growth in 2012 but some economists think that could be missed because of a global slowdown.

TRADE FOCUS

Wen's delegation met Jose Manuel Barroso, president of the executive European Commission, Herman Van Rompuy, who heads the European Council representing national governments, and EU Trade Commissioner Karel De Gucht.

Overseas trade is one of few bright spots in Europe and a critical source of growth for the region's economy which has slumped under the weight of the debt and banking crises. EU gross domestic product is falling and unemployment steadily rising.

Trade between China and the European Union rose to 428 billion euros ($554 billion) in 2011 and Chinese companies are increasingly investing in Europe.

Business leaders said that accompanying flare-ups were unavoidable, but that they wanted as few as possible.

"As the global economy remains weak, trade frictions are on the rise," said Wan Jifei, chairman of China Council for the Promotion of International Trade, told executives at the business conference.

This, he said, was "inevitable as China's foreign trade expands and many countries face a series of difficulties and challenges".

The EU's most recent anti-dumping action, on Wednesday, targeted organic coated steel products from Chinese companies, including Baoshan Iron and Steel Co.

Zou Changzheng, chairman of Baoshan unit Baosteel Europe, said Chinese companies should exercise restraint as they move into overseas markets. "And for Europe, there should be fewer such cases initiated," he said in a speech.

Europeans think China could defuse some of the spats by opening its market for public projects and procurement, and by giving foreign companies better legal protection in China. One way to do this would be for China to join the World Trade Organisation's global procurement agreement.

Alain Berger, head of French energy and transport company Alstom SA's EU office, said there was discrimination against overseas companies in big Chinese contracts.

"When you are working in China as we do, you don't have any sort of legal security ... that you will continue having access to the public procurement market," he told Reuters.

But at least one businessman was sanguine about the challenges.

"Our products and industry don't have competitors in Europe," said sewing machine maker Feiyue Group president Qiu Jibao. "The key is to have original products."

(Writing and additional reporting by Sebastian Moffett; Editing by Robert Woodward)