Li Keqiang

China, European Union move to mend rocky trade ties at summit

PUBLISHED : Friday, 22 November, 2013, 2:59am
UPDATED : Friday, 22 November, 2013, 2:59am

China and the EU yesterday began negotiations on an investment agreement aiming at reducing economic tensions, an "ambitious" move that European Commission President Jose Manuel Barroso said could help boost jobs and growth for the two economies.

Amid recent efforts to mend ties after narrowly avoiding a trade war on solar panels earlier this year, Barroso said there was room for improvement when it comes to bilateral investment.

His remarks came as leaders from both sides met in Beijing yesterday at the annual China-EU summit to begin negotiations for the investment agreement, a pact that both sides hope will help increase market access and provide better trade protection for their businesses.

China is now Europe's second-biggest trade partner behind the United States, with the value of trade between the two surpassing US$456 billion in the first 10 months of this year.

However, economic friction in recent years has strained bilateral relations, with both sides complaining about protectionist behaviour by the other.

"The EU's relationship with China is built on strong and growing trade and economic ties," Barroso said in a written response to questions from the South China Morning Post.

"But we could do much better when it comes to investing in each other's countries."

He said there were high expectations that the agreement would cover investment protection and improved market access for both sides. And this will help both our citizens in providing more jobs for them and growth for our economies," he said.

Beijing is hoping the investment deal could remove market barriers for the increasing number of Chinese firms investing in Europe, said Feng Zhongping, director of European studies at the China Institute of Contemporary International Relations. However, negotiations are expected to be bogged down by divergent views on intellectual property rights and the investment environment, Feng said.

China and the EU this year marked the 10th anniversary of a "comprehensive strategic partnership", which was originally intended to enhance both political and economic co-operation. But events of the past decade, including the global financial crisis and the EU's refusal to lift an arms embargo, had contributed to increased frustration and mutual suspicion, said Kerry Brown, executive director of the China Studies Centre at the University of Sydney.

While premier, Wen Jiabao , a key supporter of the China-EU relationship, had repeatedly pressed the EU to lift the arms embargo, which was imposed after the Tiananmen crackdown in 1989. Barroso said the EU had not changed its position on the arms embargo.

China sees pressure from the US as a major reason for the EU's refusal to lift the embargo. Although the embargo has been a thorn in the Chinese side, analysts said the new Chinese leadership is not likely to hold unrealistic expectations for its removal.

"If the EU was to be a real strategic partner, it's illogical to still impose the arms embargo. But we have come to realise it's very hard to lift," said Feng.

In response to the controversy over the US National Security Agency's alleged phone tapping in Europe, Barroso said the EU and individual countries had engaged in "a constructive dialogue" that would hopefully allow "meaningful clarifications".

"The issue needs to be fully clarified and trust rebuilt. This is fundamental between strategic partners and allies like the EU and the US," Barroso said.

The summit is the first under the new Chinese leadership. Barroso and European Council president Herman Van Rompuy held talks with Premier Li Keqiang .

Other issues expected to be discussed include the Syria crisis.