China-EU investment pact on the right track
- By Dan Steinbock
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E-mail China.org.cn, January 28, 2014
The Chinese penetration of Europe's advanced industries and markets will facilitate the accumulation of advanced technology and capabilities, which, in turn, will foster the transition of Chinese companies from cost-efficiencies to innovation.
Currently, bilateral trade in services amounts to only 10 percent of the total trade in goods and only 20 percent of the European Union's export to China lies in the field of services. From the Chinese standpoint, it is vital that the role of services, as part of the overall export, will steadily increase.
From individual to common BITs
If the talks occur difficult for Beijing, they are also challenging for Brussels. It is the first time the European Union is negotiating an investment treaty on the basis of the new power installed by the Lisbon Treaty.
As a result, different member states have different views on the common investment tool. All members hope to institute symmetric market relations with China in order to ensure European and Chinese companies will have equal access to each other's markets.
However, different countries have already negotiated different deals.
In addition, there are real differences in the industrial resources and innovation capabilities among major EU economies and small EU states, among fiscally conservative northern Europe and the ailing southern European nations, as well as the transitional eastern Europe.
On the right track
The good news is that stars may be better-aligned for a broader and deeper China-EU cooperation in 2014.
While Europe continues to suffer from low growth and secular stagnation, it is moving toward a fragile recovery. China may no longer enjoying double-digit growth, but its new leadership has now had the time to establish its position, initiate economic reforms domestically and new opening-up policies externally.
In late March of this year, Xi Jinping will reportedly pay his first visit to Brussels as China's president, as part of a European tour which will partially coincide with U.S. President Barack Obama's stay in Europe.
While there will be many topics to discuss at the top level, clearly the proposed investment pact will be one of them. The deal would increase the interdependence between the two blocs, thus potentially reducing the risk of new trade disputes.
By increasing investment in each other's territories, Brussels and Beijing may also circumvent the controversial issues of dumping and several other bilateral challenges.
The Sino-EU investment talks are not a spurt, but a marathon. All in all, negotiations are moving ahead, in the right direction, in the right way.
In addition to his advisory activities, Dr. Dan Steinbock is research director of International Business at the India, China and America Institute (USA) and Visiting Fellow at Shanghai Institutes for International Studies (China) and the EU Center (Singapore). See www.differencegroup.net
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