The European Commission has a difficult task pleasing everyone when it comes to setting policy on China. Viewed from Europe, China is often seen in black and white terms, never shades of grey – it is either an enormous economic opportunity or a looming threat.
Nevertheless, a new study funded by the Commission's Directorate General for Trade attempts an analysis of the prospects for European companies in meeting the challenges and opportunities offered by China. Its conclusions are mixed.
This is not the first document the Commission has produced on China in recent months. Late last year, it issued a new policy framework that sought to give new direction to the Beijing-Brussels relationship. What this new report – the Study on the Future Opportunities and Challenges in EU-China Trade and Investment Relations 2006-2010 – does is attempt to put some flesh on the bare bones of this policy.
On the positive side, it notes that European companies have considerable strengths that they should be able to use to their advantage in China. These include innovation and R&D, design, marketing and branding, services, management operating systems, quality of goods and services and financial depth.
However, a number of difficulties and barriers continue to be a hindrance. While Beijing has made efforts to comply with its WTO commitments, especially with regard to tariff reductions, the study finds that non-tariff barriers remain a considerable obstacle to market entry.
Based on data for 2004, it claims in that year non-tariff barriers cost EU companies US$28.1 billion: US$16.5 billion in lost export opportunities, and US$11.6 billion in services, namely finance, telecoms and construction.
The road ahead
The report makes a number of recommendations on the policy that should be adopted by the EU on trade with China. These include strengthening high-level dialogue on strategic economic issues and increasing awareness among potential investors of the risks tied to investing in China.
Attention is also drawn to the need for a coherent "EU voice" on China, an expansion of its presence in the country, and increased efforts to meet the goals of the Lisbon Agenda, the policy program intended to turn the EU into the world's most competitive economy.
On the face of it, these recommendations are unexceptional. The problems come in the implementation. A high level dialogue will perhaps enhance contacts, but many critics in Europe are likely to argue that it will not be enough to really advance the interests of European businesses.
Indeed, there are many who would argue that the time for dialogue is over.
Attempting to educate businesses on China risk is an interesting idea. But there is already no shortage of publicity on the difficulties of doing business in the country, and any European entrepreneur still foolish enough to go in believing that 1.3 billion people will be eager to buy his product probably deserves to lose every euro he's got.
Looking for unity
Enhancing the coherence of the EU voice will be one of the more difficult aims. Getting member states to unite in a push for China to open its markets may seem relatively easy but efforts are undermined by tactical differences. When issues such as defense against Chinese exports to Europe are put on the table, nuances in the domestic political landscape of each country can lead to conflicting views.
Individual domestic agendas are also the sticking point in committing real and political capital to achieving the goals of the Lisbon Agenda. Yet another appeal from Brussels for the program to be taken seriously is unlikely to make much difference.
The clear message is that the EU will support European companies in their efforts to gain access to China and make the most of the opportunities.But for many critics of the Commission in Europe, it isn't doing enough to protect the region's industries from the pressures of Chinese competition.
This report certainly helps to give some direction to EU policy in China, outlining the potential rewards for those prepared to endure the difficulties. As to whether it provides easy answers to those grappling with China the threat and China the opportunity, though, the companies with the questions may still be left wondering.