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EU gains from "Jekyll and Hyde" trade tactics with China - study

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(Globalpost/GlobalPost)

By Tom Miles

GENEVA (Reuters) - The European Union's best strategy for boosting exports to China is a "Jekyll and Hyde" trade policy, blending diplomatic overtures with tough legal action against dumping and protectionism, a study published on Monday said.

The finding suggests that China is likely to be the subject of more EU trade disputes at the World Trade Organization and that more Chinese exports will be hit with punitive duties if the EU suspects unfair trade practices.

Trade with China, which is pinning future economic growth on the development of its own consumer market, could be a tonic for Europe's economy, which is struggling to recover from years of financial crisis.

The study, "What's holding back EU exports to China?", by economists at the University of St Gallen in Switzerland, led by Simon Evenett, found China's "murky protectionism" had been effective in slowing EU imports into China, but EU states could fight back.

It found that EU member states that have called for more antidumping investigations of Chinese exports appear to have their own exports to China treated more leniently by Beijing - meaning complaining reaps rewards.

Ministerial visits to Beijing also helped win business.

"No doubt some analysts and policymakers will draw the conclusion that a Jekyll and Hyde approach to managing commercial relations with China delivers export sales," the study said.

"If that is so, then the prospects for harmonious EU and Chinese trade relations look slim."

However, the study found no evidence that EU member states' exports to China were hindered by China's management of its exchange rate or by Chinese anti-dumping actions, nor was there any export gain from subsidies paid to EU firms.

SOLAR PANELS

Evenett, who coordinates Global Trade Alert, an independent protectionism monitoring service, said the analysis was prompted by China bringing in 95 protectionist or "beggar thy neighbour" measures since November 2008, when the G20 group of nations vowed not to use protectionism to survive the financial crisis.

Of those, 49 hurt the commercial interests of at least one EU member state, and 47 of the 49 were still in force, he said.

Brussels may have already switched to a more combative strategy, having seemingly let Washington lead the criticism of China's trade openness for years.

Last September the EU launched what Evenett called "the mother of all dumping and subsidy investigations" into Chinese solar panel imports worth 26.1 billion euros (22.5 billion pounds) a year.

However, the European Union has not brought a WTO trade complaint against China for a full year.

The last such dispute was its challenge, jointly with the United States and Japan, to China's export curbs on rare earth metals, tungsten and molybdenum, following a victory in a related case concerning a range of other raw material exports.

EU efforts to tackle Chinese dumping - selling exports at unfairly cheap prices - took a double-knock in 2011, when China won WTO cases over exports of shoes and metal screws to the EU, forcing a Brussels to change its anti-dumping law.

But the EU bounced back with a win in another WTO dumping case last month, over X-ray security scanners, prompting EU Trade Commissioner Karel de Gucht to say he would not let China abuse the trade defence rules to carry out tit-for-tat retaliation against European firms.

"As the evidence mounts, pressures to act will grow," Evenett said. "There is only so much that diplomacy can smooth over."

(Editing by Alison Williams)

http://www.globalpost.com/dispatch/news/thomson-reuters/130318/eu-gains-jekyll-and-hyde-trade-tactics-china-study