EU Commissioner Malmström on strengthening EU-China trade & investment relations

EU Commissioner Malmström on strengthening EU-China trade & investment relations

183378_10151173231884417_70108083_nEU Trade Commissioner Cecilia Malmström delivered on February 6, 2017 a speech on China’s reform agenda: what’s next for European companies?, event organised by Business Europe, Brussels. TextileFuture presents this speech as an important document in today’s geopolitical situation

 “Welcome to you all. And happy Chinese new year. Those born this year, the Year of the Rooster, are said to be trustworthy and reliable …

…this is a characteristic I know investors always welcome. Who knows, perhaps this year will also be a wake-up call!

I’d like to set out how I see the current state of EU-China trade relations. And how our proposed investment agreement offers an opportunity, in a time of great geopolitical changes and challenges.

These days, we see many politicians offer simplistic solutions to complex problems. But barriers and protectionism are a threat: to the open societies of Europe…

… to the livelihoods of billions across the world, including the least well-off in the developing world.

Alongside that threat comes an opportunity for the EU: to strengthen our trade relations with other partners.

To show that the way we would like to make our country great again is building bridges, not walls. In this context, I welcome President Xi’s commitments in Davos three weeks ago.

He committed to develop free trade and investment, promote liberalisation and facilitation, and say “no” to protectionism. As he put it, protectionism is like being locked in a room: it keeps out wind and rain, but also light and air. I agree.

He noted a trade war would be catastrophic for all parties. I agree with that, too.

This year, the challenge will be to ensure President Xi’s stated ambition is delivered …

… that the country ‘walks the talk’….

.. and that rhetoric is matched by reform.

No country has ever succeeded without reforms; China included.  And China has proven it can reform in the past. The current success of its economy is due to the courageous measures to open up undertaken by Deng Xiaoping in the 1980’s.

Its subsequent accession to the WTO required significant economic reforms too.

After the US, China is the EU’s second biggest trading partner; and the EU is China’s largest. Trade with China is worth one fifth of our goods imports, and almost one tenth of our goods exports. I am not one of those who see a trade deficit as inherently bad. But belief in open trade does not mean being naïve.


EU-China trade figures are already impressive. But I believe they could be even stronger. Many barriers and irritants remain to EU-China trade…

… and we are far from balance or a  reciprocal approach.

So, what are the prospects for increasingly open trade and investment in the coming years? The answer depends very much on China’s ability to continue reforms.

It is now just over fifteen years since China joined the WTO: and since the last major package of reforms introduced in China.

More recently, the Third Plenum announced a new phase of reforms to change China’s economic model:

… to give the market a more decisive role in the economy…

… and reinforce the rule of law and independence of the judiciary.

That was four years ago and these announcements have not materialised. Indeed sometimes reforms have gone the opposite direction, reinforcing the role of the State and reducing space for the private sector. From national security rules, to the “Made in China 2025” strategy.

Today, the state remains in control over much of the economy, distorting competition and investment.

Meanwhile, foreign investors face a flood of opaque and obscure barriers: restrictions, discrimination, unfair competition, questionable inspections and audits, discretionary licensing procedures, and more.

And China is a difficult negotiating partner, as we saw last year in many areas: from managing steel overcapacity…

… to cutting tariffs on environmental goods…

… to protecting our geographical indications.

Meanwhile, foreign investors face a flood of opaque and obscure barriers: restrictions, discrimination, unfair competition, questionable inspections and audits, discretionary  licensing procedures, and more.

And China is a difficult negotiating partner, as we saw last year in many areas: from managing steel overcapacity

… to cutting tariffs on environmental goods…

… to protecting our geographical indications.

So our relations are not without their challenges. But we have a positive agenda too. And, in particular, the bilateral investment agreement we are negotiating is a great opportunity.

An opportunity for new and better market access for European investors, levelling the  playing field…

… without discriminations based on origin or ownership….

… with greater certainty, transparency, fairness.

Perhaps it would be an opportunity for wider reform by China of its investment regime, too. An issue on which we will continue to engage and cooperate.

As Chinese investment into the European Union stands almost five times higher than European investments in China, this agreement offers lots of opportunity for China.

Last year, Chinese investment flows into the EU rose to a record high of almost €40 billion, while EU investment into China fell to a ten-year low of under 8 billion.

That tallies with the experience many of you report of a worsening investment climate. These imbalances can be addressed with the EU-China investment agreement.

The agreement must be credible and with a high level of ambition. I want it to add value for you…

… address the real-life difficulties you face when investing …

… and, as an absolute priority, to improve and expand market access conditions in China.

At a time when global openness might be under threat, this agreement has never been more vital. So I hope we can see a new impulse this year.

I have referred to trade, investment and economic reforms. But trade also needs to go hand in hand with and be based on values. This is what we are promoting in our agenda for a  more responsible EU trade policy. This includes values such as respect for the rule of law and human rights, and environment and labour protections.

These are essential elements for well-functioning business relations between us. After all, trade and investment is not only about exchanging goods and capital: it is about reinforcing person-to-person contact; people travelling, living and doing business in each other’s country. And our consumers and businesses care about and need basic foundations like respect for the rule of law…

… independence of the judiciary …

… and respect for and independence of lawyers.

There is a growing concern among the business community about the deteriorating situation on the freedom of expression and association. This is restricting companies’ – and many others’ – ability to communicate, access independent information, and meet and discuss openly.

As I said last year, we will continue to urge the authorities to fulfil their international obligations and respect their commitment to the rule of law.

The EU regularly calls for investigation and punishment of those responsible for human rights violations. This is raised in our bilateral meetings and the human rights dialogue—of which I hope the next meeting will be held shortly.

This is our offer to China. Open trade that is fair, transparent, and based on values

If others around the world want to use trade as a weapon: I want to use it as a tonic; a vital ingredient for prosperity and progress.

If rising protectionism from elsewhere is a threat to the Chinese economy, we stand ready to engage and fight against it together.

If others are closing their doors, ours is still open. As long as the trade is fair.

And we will give China every opportunity to uphold its pledge against protectionism, and towards a multilateral agenda, too. For example, we have set out plans for an investment court at multilateral level, which I hope China and others will support.

This year, we should be firm in holding China to the ambitions and aspirations President Xi set out in Davos.

I am confident this time it will translate into action.

I do not underestimate the challenge. Reforms are not easy; we have experienced that in  the EU, when the financial crisis meant we had to reform our monetary union, and create a banking union.

But your efforts, experience and expertise — from BusinessEurope, the EU Chamber of Commerce in China, and the EU-China Business Association — will be vital, crucial, in helping us to achieve our goals on EU-China trade and investment.

And the benefits – for all sides – will be great.”






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