Trade frictions with the EU likely to grow

European Parliament may look for new measures to fight products from China

China and the European Union may face a fresh round of trade friction as Brussels is planning harsher trade defenses against Chinese imports.

EU trade chief Karel de Gucht is seeking to update the tools that Brussels uses to fight "unfair trade practices" and which date from before China's transformation into a powerful exporter, Reuters reported on Thursday.

Some in Europe say the rules are too soft. The European Parliament pressed the trade chief on Wednesday to build stronger defenses against cheap imports from China.

EU lawmakers want to make it easier for small companies to take on countries that flout world trade rules by exporting goods at below the cost of production. Legislators also want to do away with a European rule that limits punitive sanctions to only what is absolutely necessary to correct any injury caused by illegally subsidized imports, Reuters said.

The Parliament's position is "a lot more radical", Christofer Fjellner, the lawmaker leading negotiations with the European Commission on the issue, was quoted as saying. The commission is the 28-nation bloc's trade authority in Brussels.

Sang Baichuan, director of the Institute of International Business at the University of International Business and Economics in Beijing, called the moves "trade protectionism that aims to boost local employment.

"The EU's economic recovery is very slow and the unemployment rate is very high. The bloc expects more jobs. This is the key reason for the protectionist move," Sang said on Thursday.

He added that China, which is tipped to become the world's largest goods trader, has very competitive advantages, especially price advantages, in exports to the EU.

Sang said China should turn to the dispute settlement body of the World Trade Organization and push the EU to avoid the misuse of trade protectionism measures.

"The Chinese government must increase direct communication with the EU because China-EU trade growth benefits both sides. Only bilateral trade expansion can create more jobs in the bloc and boost its economic recovery," Sang said.

China needs to increase imports from the EU, especially high-end manufactured goods and services, which is in accordance with the country's economic restructuring, Sang said.

The EU is China's largest trading partner, while China is the EU's second-largest trading partner after the United States, its biggest source of imports and one of its fastest-growing export markets. Bilateral trade surged in recent years and reached $559 billion last year, up 2.1 percent year-on-year, China's General Administration of Customs said. Trade between China and Europe is now worth well over 1 billion euros ($1.37 billion) a day.

But trade relations are tense between the two. Of the 12 cases that ended in the imposition of punitive duties by the European Commission last year, seven involved China.

Trade frictions will be "very frequent" in China-EU trade this year, Sang said.

But China-EU economic ties, on the whole, will keep developing and the avoidance of a trade war is in line with long-term interests.

"If the EU is determined to initiate trade frictions, China can surely take similar countermeasures," said Wang Haifeng, a researcher with the Institute for International Economic Research at the National Development and Reform Commission.

He warned that "China has the advantage of a huge market and escalated trade frictions will bring a much heavier blow to the bloc than to China".

The EU said on Jan 30 that it would initiate an expiry review of anti-dumping measures, with duties as high as 74.1 percent, on imports of certain iron or steel fasteners from China.

The review will determine whether the expiry of the measures would be likely to lead to a continuation or recurrence of dumping and a continuation or recurrence of injury to the EU industry, and thus whether to renew tariffs on the products for another five years, said the European Commission in its Official Journal.

Shen Danyang, spokesman for the Ministry of Commerce, said at a recent news briefing that it was not fearful of frictions given the huge trade volume. Shen said the only way to resolve disputes is through consultation and dialogue, and the two sides have the ability and wit to control friction.

Markus Ederer, former EU ambassador to China, said in late January that China-EU relations had matured and the proper resolution of the solar panel dispute set a good model for resolving other issues.

China and the EU were close to a trade war last year over solar panels. The EU claimed that China was selling panels below cost and giving illegal subsidies to domestic manufacturers. China said the dispute put the jobs of 400,000 Chinese workers at risk.

Premier Li Keqiang's intervention led to a settlement that set a minimum price and a limit on the volume of EU imports of Chinese solar panels until next year.