EU goes east

The EU-China Summit gets underway in Beijing this week with a long list of European demands and few expected Chinese offerings.

Beijing and Brussels are currently negotiating a comprehensive new Partnership and Cooperation Agreement (PCA) to replace the existing and outdated 1985 Sino-European treaty on commercial relations.

However, trade relations have recently deteriorated: the EU imposed anti-dumping charges on textiles in 2005 and shoes in 2006; there have been highly publicised product recalls of Chinese goods; and EU investors have suffered a number of high-profile setbacks while trying to establish themselves in China. And the list of European concerns is growing, including:

• trade-related regulatory issues, such as intellectual property rights, copyright and product safety;
• exchange rate issues, with the EU calling on Beijing to float the undervalued yuan more freely;
• environmental issues, with Brussels trying to get a reluctant Beijing to commit to mandatory emissions targets;
• domestic issues, such as criminal justice reform, the freedom of expression and the freedom of religion; and
• international issues, as the EU would like to see more cooperation from China on Iran, Kosovo, Burma and North Korea.

In this context, significant progress on the PCA is unlikely.  Since the EU is China's largest trading partner, with a market of over 500 million consumers, it is in a relatively strong negotiating position. But with less than 10% of EU exports currently going to China, the Europeans are also keen to get better access to tap into the enormous potential of the Chinese consumer market. They will therefore be careful to ensure that their worries not to damage their economic interests.