China accord heralds new phase in relations with EU

Date: 25/05/2000

By Shada Islam

The EU's market-opening deal with China clinched by Trade Commissioner Pascal Lamy last week ensures Beijing's entry into the World Trade Organisation by the end of this year.

But diplomats say it will also have far-reaching repercussions for the Union's future political and economic relations with Beijing.

The agreement secured after five days of intensive negotiations between Lamy and Chinese Foreign Trade Minister Shi Guangsheng - and the last-minute intervention of reformist Prime Minister Zhu Rongji - has been widely welcomed by European business leaders as a landmark step in ensuring improved foreign access to the booming Chinese consumer market. Lamy was also praised by EU foreign ministers for concluding a "sound commercial package" which reflects Europe's specific trade interests.

Diplomats say the deal also heralds an important new phase in the Union's often-troubled relations with Beijing. "We are talking of a more respectful, more balanced relationship between Brussels and Beijing in the future," said one.

China may have initially believed that finalising an accord with the EU would be a simple exercise compared to the more politically-charged pact signed with Washington last November. But diplomats say the Commission's tough negotiating line, backed up by Union governments' determination to stand firm on key issues, will encourage a change in Beijing's view of the EU.

Lamy's decision to respect China's political difficulties on the key question of granting majority stakes to foreign firms in mobile telephone and life insurance joint ventures may also stand the Union in good stead in future dealings with Beijing.

Instead of crossing what he described as the "red line" drawn by China on the sensitive issue of foreign ownership, the EU's trade chief decided to press for compensation in the form of immediate market access gains, both within the telecoms and insurance sectors and beyond.

"A great deal of what we have achieved has been offered by the Chinese to compensate us for what they were unable to deliver," admitted Lamy, adding that when given a choice, he opted for immediate benefits in fast-evolving markets such as telecoms and insurance instead of waiting for concessions further down the line.

In addition, European exporters and investors stand to benefit from the tariff-slashing measures for 150 key products included in the Union deal as well as the opening up of China's state monopoly on importing crude and processed oil. Lamy says he settled for a 25% reduction in China's import tariffs on cars - similar to the offer made to the US - to provide protection for European car makers with investments in the country.

The EU's market-opening deal with China clinched by Trade Commissioner Pascal Lamy ensures Beijing's entry into the World Trade Organisation by the end of 2000. But diplomats say it will also have far-reaching repercussions for the Union's future political and economic relations with Beijing.