Mandelson warns of EU backlash
Updated on 28 November 2007
The EU trade commissioner has warned that China needs to close the trade gap if it wants to prevent a backlash in Europe.
He was speaking on the margins of an EU/China summit and a meeting of European and Chinese central bankers in Beijing today.
Inside the Great Hall of the People, at both the business and political summits, the Europeans expressed frustration. China's exports to Europe grow, while its market remains partially closed to European goods and services. The trade gap is widening.
"During my time in China these last five days, it has grown by over 2 billion euros," says EU trade commissioner Peter Mandelson.
Mr Mandelson's meetings haven't been easy: "I wouldn't say they're very receptive to my arguments. The reality is they want to receive European goods and services and investment when they want to, and to erect barriers to them when they believe it's not in their interests."
'I wouldn't say they're very receptive to my arguments. The reality is they want to receive European goods and services and investment when they want to, and to erect barriers to them when they believe it's not in their interests.'Peter Mandelson
What's more, the Chinese currency - which tracks the dollar - is weakening, making Chinese goods cheap in Europe and European goods expensive in China.
The European money men are holding talks here too. "This concern is creating a lot of problems to the European economy, and could have as a result protectionist reactions could occur in Europe," says Eurogroup Chairman Jean-Claude Juncker.
But Prime Minister Wen Jiabao said the the Eurozone's real problem is the falling dollar, and the trade gap's not China's fault.
"The main reason for this is our differing responsibilities and comparative advantages. Although China has a trade surplus with Europe and with the USA. We have a trade deficit with Japan, South Korea, Australia and South East Asia. The exchange rate affects the trade balance to a certain extent, but its not the only deciding factor," says Wen Jiabao
But Mandelson says: "I'm beginning to explain more and more why we are unhappy, why I believe the present situation is unsustainable, and untenable, and why China has got to contribute more to its solution.
"If that fails, if that breaks down, then we are at risk of seeing a real public backlash which would not only affect Europe and China but would have a very negative effect on the global economy as a whole."
EU and Chinese officals signed agreements, and announced new high level committees on trade and currency - to meet next March. Not exactly urgent action.
The Chinese say consensus has now been reached on the trade gap, but many European officials and business people will be sceptical.
They say nothing will change until the Chinese open their markets more and allow their currency to rise - but nothing that was said here today suggests the Chinese are ready to do either.
