SPEECH/03/302
Pascal Lamy
EU Trade Commissioner
EU’s enlargement will contribute to the
deepening of EU-China relations
EU Chamber of Commerce in China
Beijing, China, 13 June 2003
Ladies and Gentlemen,
Well, it is great to be back. It feels like a lot more than eight months since I was
here, to be honest. You and indeed China have had a tough, tough time.
Coverage of the SARS epidemic in the foreign press set aside, it is of course now
vital to ensure that there is no lasting effect on China's economy and business
interests. Perhaps the most amazing thing is how completely the Chinese economy
has rebounded, with growth levels touching if anything new heights in the first
quarter of this year, even if we should expect some effect on growth overall in 2003.
But in a way it is much less than eight months, because I had the pleasure to
receive a visit from President Behrens and representatives of the Working Groups
in Brussels only last March. This level of frequency in our meetings demonstrates, if
there was ever a need to, just how effective, indeed essential, the EUCCC has
become. In just a few short years, you have gone from excited launch to
established institution: you are of course now our main business interlocutor on
Chinese trade relations. So SARS or no SARS, I at very least owed you a return
visit.
This rather rapid visit to China was meant to be my main trip of the year, built
around the annual festivities of the Joint Committee. Unfortunately this has been
postponed due to the SARS outbreak, but I am delighted to able to meet the new
Chinese Government for the first time, in particular Premier Wen Jiabao. I was
deeply impressed by his rather steely determination to continue pressing on with
China’s reforms, and with integrating the Chinese economy globally. But it is also
a very strong signal that the European Union remains every bit as important a
partner for the new Chinese government as under the previous one.
For my own part, I stressed that our bilateral relations are essential at a difficult time
for China due to SARS and I personally passed to him Romano Prodi's warm
greetings and expressions of deepest solidarity. But China cannot rely just on
warm words, but also needs hard cash. So I am very pleased that the EU has
rapidly mobilised around 10 million € on SARS related cooperation and related
research and development.
I was also able to update Premier Wen on the EU’s forthcoming enlargement and
reassured him that the incorporation of 10 new countries, long-time friends of
China, will help to deepen EU-China relations and improve our bilateral trade. It is
of course true that we all have to work hard to persuade China that this is an
extremely positive development for her.
I was also pleased to renew my acquaintance with Minister Li from AQSIQ, the
General Administration of Quality Supervision, Inspection and Quarantine. We have
agreed with Minister Li to strengthen our contacts in the future to resolve the many
remaining technical issues which we have in the areas of responsibility of AQSIQ.
But, more importantly, I was particularly pleased to learn the good news from him
that China is now lifting the ban on Dutch imports, a long standing problem.
Obviously a definitive lifting of the ban can only take place based on the results of
technical inspections – these are scheduled for the end of June. But this clearly
shows that common work and sustained efforts are essential to tackle trade issues
– and that they can bring results.
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Finally, I will have the chance to meet tomorrow with Mr. Lu Fuyuan, the new
Minister of Commerce, who I am delighted to welcome onto the travelling circus of
WTO trade ministers, as we tread a rather weary, but still optimistic, path to the next
WTO Ministerial meeting in Cancun and the end of the WTO Round. We will review
together the overall state of Sino-EU trade relations and prepare for the busy
autumn ahead, featuring Cancun, and the WTO Trade review of Chinese
commitments in Geneva, not to mention the next EU-China Summit in Beijing.
So let me share with you my views on the overall state of our bilateral relationship
with China. I will touch on three dimensions of our trade relations: implementation,
negotiation and cooperation.
One and a half years after China’s entry into the WTO, where do we stand? When I
was here in October I said that our overall assessment on China’s implementation
of her commitments was a positive one. I maintain that assessment, although we
also need to keep our eyes open and react when necessary. It was a vast and
sprawling negotiation, and we should not be surprised that it is a vast work to
monitor and track Chinese implementation. On this subject in particular, I want to
hear your views, the views of the European business community.
The first year was largely devoted to successfully putting into place the vast amount
of new legislation required for implementing the Chinese commitments.
In some instances we have seen some difficulties, related to delays, lack of clarity
or apparent discrepancies with the WTO agreement. One or two examples we have
unearthed which are grounds for concern. For instance, there is a one and a half
years delay in passing the legislation to allow car companies to offer purchases on
credit to Chinese consumers. Likewise, the newly-published rules on mergers and
acquisitions introduce a rather vague mechanism controlling the purchase of local
companies by foreign ones: the criteria are anything but clear. Also, China is
allowing foreign companies to engage in import/export throughout China but the
new regulation includes some requirements that did not figure in the Protocol of
accession. Something similar occurs in the telecom sector. We need to clarify all
this.
But my overall view remains positive. We are not in Brussels overwhelmed with
complaints and concerns about Chinese failure to implement its legislative
commitments. These instances above are generally the exception to the rule:
China has delivered legislation that is mostly rather in line with what we expected.
Probably the area where this is most visible is on tariffs. As planned, duties are
being reduced year after year, and this has led to what is currently the most tangible
economic benefit in terms of market access.
Nevertheless, the picture is a bit more mixed when we look at it from the ground.
Implementation in practice is not easy, and no WTO Member can claim to have an
entirely clean record in this respect. In my view, we need to focus on the following
elements to reduce the gap between law and practice:
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Industry and consumers should be governed by law. The wide discretion that is still
in the hands of the public authorities should be reduced, as far as possible, to the
international standards in modern economies. All too often, unclear legislation is
combined with excessive discretion. For instance, the current management of
Chinese import quotas has led to the appearance of a parallel market for licenses,
particularly for fertilisers and automobiles. Full transparency is also necessary when
regulators consult industry on draft legislation, to avoid the risk that only some
companies getting the chance to provide comments. Great if you are picked out:
not so good if you are left out in the cold.
There is still a tendency to sometimes favour local companies over foreign ones. In
this respect, the establishment of a one-stop Ministry of Commerce, dealing with
both domestic and external trade, is to be welcomed since this will hopefully lower
the risk of discrimination. But problems will remain in some areas such as in
financial services, where capital requirements reinforce the dominant position of
Chinese State-owned banks and insurers against foreign players. Although China
considers them as prudential requirements, we view them as excessive.
For instance, banks in China need 72 million € to enjoy the same scope of business
than we grant in the EU with just 5 million €. There is no inherent reason why this
should be so. And it has an immediate effect on market access.
The wide discretion granted to the administration sometimes leads to
inconsistencies between different provinces and municipalities when they apply the
law. This adds to the level of uncertainty. A clear example is in the implementation
of standards by different customs offices or the protection of intellectual property
rights.
So, looking at implementation on the ground, it is certainly easier to spot difficulties
in the texts of legislation than in their practical implementation. It is in the latter
instances that the role of business is even more important.
The Working groups of the Chamber are now busy preparing the updates of their
Position Papers. I cannot stress strongly enough how important it is to continue
ensuring good quality Papers. As you know, they have become a key and rather
prominent tool for the Commission when assessing the implementation of Chinese
commitments.
So I am delighted to see that the Chamber is growing in this respect, and is
becoming even more professional, partly thanks to the decisive support of some
corporate sponsors. The incorporation of business managers to help the Working
Groups, which make up the core of the Chamber, will certainly help to increase
awareness of the objectives of EU business in China. And of course, the Delegation
of the European Commission will continue to work hand in glove with the Chamber.
To conclude on this point, let me remind you that from October to December the
WTO will conduct its second annual Trade Review on the implementation of
Chinese commitments. The first time took place during a year of transition. This
second one should show progress and prepare the ground for the third year, when
essential Chinese commitments will enter into force, such as on distribution or
trading rights. Our approach is to be firm but fair in this: it is not right to use this
mechanism to hound the Chinese unfairly in Geneva. But we can and should use it
to raise clearly identified problems.
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Finally, let me turn to Geneva and the WTO Doha Development Agenda. I know
that current WTO negotiations in Geneva may seem far away for you - but as good
businessmen, you should always keep an eye on the long distance weather
forecasts.
As with Chinese accession, long term weather forecasts become
today's weather sooner than we sometimes expect. Let me also tell you briefly
where we stand on this.
Concluding the round by the end of 2004 remains our priority. For this the next
Ministerial Conference in September in Cancun must be a success. For Cancun,
the key areas where agreements are needed are:
- On agriculture, industrial market access, investment, competition, trade
facilitation and government procurement, we need to decide on the negotiating
modalities.
- We also need to put together a package of results with real value added for
developing countries and making further progress after Cancun.
- On Geographical Indications, Trade and environment and Dispute Settlement,
Cancun should start delivering results, albeit sometimes in rather moderate
ways, and point towards the final outcome.
To attain what remains a rather high level of ambition, the EU will need to continue
to force the pace, and we hope others, including China, will join us in the vanguard.
Doha, of course, was the conclusion of China’s accession negotiations and the
start of a new round of trade negotiations.
As a large and influential WTO Member, China also carries responsibility for making
this round a success in order to bolster economic growth and strengthen
multilateralism.
More prosaically, it is only with an ambitious position that China
will be able to get others to "pay", as she herself has done, in the accession
process.
We understand that China still remains hesitant to make new market access
commitments but feel that China, frankly, could be ready to do rather more in
working to strengthen the rules aspects of the WTO. This will advance the
multilateral agenda that we both share, an agenda which is the only choice in this
multipolar world. In a way, Cancun will be the first real test for assessing China’s
commitment with the WTO system. For my part, I am extremely confident that the
Chinese government will play a very and constructive role, and I look forward to
discussing the upcoming mini-Ministerial meeting in Egypt, which takes place only
next week, with Minister Lu.
Before I conclude, a brief word on how we can best pursue all the objectives I have
just described, using what I can only describe as a formidable tool in the shape of
its cooperation programs. With a current budget of 22 million € for various traderelated projects, the EU is the top donor in terms of trade assistance to China. A
new 15 million € project, just signed a couple of days ago, will be implemented for
the five years to come.
With the same logic, since regulatory issues have a growing importance in our
bilateral relations, we are working to establish bilateral regulatory dialogues on
issues such as industrial standards, conformity assessment, etc. The objective is to
use early exchanges of views to ensure we avoid the emergence of new problems
in the future.
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The first part of my conclusion is unescapable: China is clearly taking advantage of
its integration in the WTO and the world economy. She has become, extraordinarily
quickly, the world's 4th largest trader (after the US, the EU and Japan), its surplus
with the world keeps growing, and it is now the top destination for FDI (ahead of the
US). Such advantages keep China’s economy booming.
On our side, in 2002 China became the EU’s 3rd largest trading partner, overtaking
Japan. There has been a striking upwards trend in the first three months of 2003.
Trade has grown by 20% (more than twice that if you prefer the Chinese statistics)
and EU FDI in China has increased by a staggering 80%, again according to
Chinese statistics.
Of course, in parallel with this amazing performance, China has to keep in line with
its commitments, and particularly her pledge to grant effective and nondiscriminatory access to the Chinese market.
As EU-China trade ties continue to deepen, as our interdependence grows and
grows, as our political relationship blossoms, the EU and China are becoming ever
closer partners. We can see that in the management of multilateral trade. We both
have similar interests in multilaterally strengthening the WTO system. At the same
time we will both pursue our respective bilateral trade interests to ensure the best
possible level of mutual market access. That is natural, that is the path of mature
partners.
And in both the stewardship of multilateral rights and obligations, and a vigorous yet
productive bilateral relationship, we will continue to depend heavily on European
business in China - and we know we can continue to count on the European
Chamber.
Thank you very much. Happy to take questions.
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