Many of our commenters are quite hostile to the EU-US trade deal currently being pursued. They argue, among other things, that the regulatory approaches in the US and Europe are too different, and they believe the Trans-Atlantic Trade and Investment Pact (TTIP) will erode environmental, food safety and other standards in the EU.
Not all of our readers are opposed to a trade deal, however. We had a comment from JJ, for example, who says he fully supports TTIP. Indeed, he even suggests that the EU should sign a similar Free Trade Agreement (FTA) with China along the lines of the EU-India or EU-US agreements currently being negotiated.
To get a response to this suggestion, we put JJ’s comment to Joerg Wuttke, President of the European Chamber of Commerce in China. How would he react?
Well, Europe and China have already started negotiations on a business investment treaty which covers market access for European companies into China. Business in Europe would rather have the EU take one step at a time; so, first the successful conclusion this year, or at the latest in 2016, of an ambitious business investment treaty before we consider going down the road of an EU-China FTA.
We also put JJ’s comment to Hanns-Guenther Hilpert, Head of the Asia Research Division at the Stiftung Wissenschaft un Politik.
China has in fact already asked the EU to begin negotiations on a Free Trade Agreement. However, the Commission and most Member States are reluctant about it. So, it’s not a short-term thing, but in the mid-to-long term it could happen.
However, I would say that neither the EU-US nor the EU-India FTAs are good role models… For example, with TTIP, the US and the EU are searching for common grounds to establish trade rules for the 21st century. The EU objectives towards China, however, would be different; it would be about securing the implementation of modern regulation in China, and to confront the challenge of China’s competitiveness in Europe, and also to ensure that manufacturing and services can compete on equal footing in China. So, for me, if there is any role model for an EU-China FTA, it would be rather the EU-South Korea foreign trade agreement…
We also had a comment from Marilina who argued that European companies would struggle to compete with Chinese rivals because labour costs in China are so much lower. We put this to Joerg Wuttke to see how he would respond.
Yes, of course we cannot compete on labour costs. But, frankly, our products are so different that we have completely different portfolios. We are in upscale chemistry, we are in cars, complex machinery and so forth, whereas China is still a low-tech economy which derives its added-value from a lot of cheap labour. So, I would say the overlap of products is very, very small.
Besides which, we benefit greatly from these cheap labour costs, which gives us all these textiles, shoes and electronics that we can buy in European shops much cheaper and then spend our other money on European items. So, in the end, it’s win-win at this stage. Certainly there are some losers that are companies facing Chinese competition, but the fact is that we should stay ahead of the curve and be technology driven, and then we shouldn’t worry about competition.
Finally, we put Marilina’s comment to Iana Dreyer, Founder and Editor of Borderlex.eu, an information website on EU trade Policy. What would she say?
I think this is changing. Labour costs in China have increased dramatically over recent years, and China now has quite a substantial middle class. So, the economic relationship that is shaping EU-China trade and investment is really changing. The cheap labour dimension of that relationship is now less important, and that kind of production is shifting to South and South-East Asia, to countries like Vietnam, Pakistan and Bangladesh. In the coming years, China will be more about investing in services in infrastructure, finance and business – precisely the kind of activities that will sustain a more urban and middle class China. I think the idea that China’s economic growth is still based on very cheap labour is still true to a certain extent, but it’s less and less the central issue in its relationship with the EU.
Should the EU sign a Free Trade Agreement with China? Let us know your thoughts and comments in the form below, and we’ll take them to policy-makers and experts for their reactions.