Brussels visit heralds closer trade ties for EU and China

With Vice-Premier Ma Kai, the highest official from Beijing to visit Brussels so far this year, concluding his trip at the European Union headquarters last week, China and the EU have started to iron out their differences and bring their strategic partnership to a higher level.

Observers say the two sides intended to use Ma's visit as a warm-up for another decade of closer partnership, as the nations mark the 10th anniversary of their Comprehensive Strategic Partnership.

The concrete outcome is the mutual recognition of the urgency of launching investment pact negotiations, which will hopefully be announced when Chinese and EU leaders gather in Beijing for their summit in November. And they believe closer trade and economic relations will help to boost multilateral trade and investment relations.

Of course, it is also important for both sides to acknowledge the political importance of close relations in light of the solar panel trade dispute, which was solved in an amicable way after months of wrangling.

Andre Sapir, senior fellow of Brussels-based think tank Bruegel, said the success of the China-EU High-level Economic and Trade Dialogue in Brussels during Ma's visit last Thursday has demonstrated that the two parties can gradually overcome their differences.

"In fact, the two partners don't have any other choice but to work more closely, given their high degree of interdependency," said Sapir, adding that the EU is now China's most important trading partner, while China is the EU's second most important after the United States.

Sapir said the main achievement of the dialogue was the decision to launch bilateral investment negotiations, which will be formalized at the China-EU summit in Beijing in November.

Sapir said the negotiations will seek to improve existing bilateral agreements between China and individual EU members that are supposed to guarantee investors fair treatment and protection against having their assets expropriated without fair compensation.

Improvement in China-EU trade and investment relations comes at an important moment, only weeks before the Ninth WTO Ministerial Conference, which will be held in Bali, Indonesia. It may increase the chances of an agreement on the Doha Round, though the probability of success remains slim.

Jan-Egbert Sturm, director of the KOF Swiss Economic Institute in Zurich, also said China and the EU are important to each other in terms of trade.

"Both benefit highly from this trade, and such dialogues are important to explore further opportunities and pave the way for stronger trade relationships," Sturm said.

In addition, their restated commitment to working on sustainable and balanced growth around the world helps in assuring markets of the seriousness of these intentions.

In recent years the lack of progress in multilateral trade negotiations has led to a revival of bilateral trade negotiations and agreements.

"The negotiations on a China-EU investment agreement can be seen in this light," said Sturm.

Whether such improved ties will also help in creating a breakthrough in the negotiations involving the WTO remains to be seen, but Sturm said they would certainly be very helpful for both the EU and China.

About one week before Ma's visit, the EU Foreign Affairs Council on trade issues adopted the mandate for the European Commission to negotiate a bilateral EUChina investment agreement, which would be the first EU stand-alone investment agreement.

China and the EU are to properly manage their trade frictions and deepen cooperation between the two sides, said China International Trade Representative Zhong Shan during the Fourth China-EU High-level Economic Dialogue on Oct 24.

Now that the two sides are negotiating a China-EU investment agreement, Zhong said that China appreciates the efforts the EU has made in pushing the investment agreement negotiations forward.

"We are happy to see the European Commission has got the mandate for negotiations. I hope the two sides will step up related efforts," he said.

Zhong said that China and the EU have become important trading partners and show great potential for bilateral investment. "We are confident that a substantive China-EU investment agreement will promote and facilitate two-way investment and bring our commercial cooperation into a higher level," he said.

Economic experts have given positive feedback on the dialogue. Duncan Freeman, senior research fellow at the Brussels Institute of Contemporary China Studies, said the agreement on principles is positive on both bilateral and multilateral issues. However, he said it remains to be seen whether this will have any real impact on how they deal with problems such as trade frictions and whether they can deepen cooperation.

"There is probably a better chance that the EU and China can create positive cooperation on specific technical issues like customs and quality inspection than on the bigger policy issues related to trade frictions," Freeman said.

Li Xiaofei contributed to this story.

From left: Vice-Premier Ma Kai, Vice-President of the European Commission Olli Rehn and European Commissioner for Trade Karel De Gucht meet journalists during the China-EU High-level Economic and Trade Dialogue in Brussels on Thursday.