China wants the European Union to kick its anti-dumping measures on footwear to the curb
　　
　　
　　WE HAVE A DEAL: Chinese Minister of Commerce Bo Xilai and Peter Mandelson, Commissioner of the European Union for Trade, congratulate each other after reaching an agreement on textiles in Beijing
　　
　　Among all the advanced countries and regions, the European Union (EU) is China"s most stable and mature trading partner. Since China established diplomatic ties with the European Economic Community in 1975, especially after the EU published its first policy paper on China in 1995, Sino-EU relations have developed rapidly, from an all-round partnership to an all-round strategic one. In addition to working together on bilateral issues, the two sides also cooperate on global ones such as climate change, United Nations reform and WTO negotiations, as well as global scientific and technological cooperative projects such as the International Thermonuclear Experimental Reactor.
　　Economic and trade interests are the basic elements of ties between China and the EU. In 2004, the bilateral trade volume reached $177.3 billion, which was 15.4 percent of China’s total foreign trade volume that year, and 74 times the amount of their trade in 1975. In 2005, the trade volume increased 22.6 percent, reaching $217.3 billion. During the first four months of 2006, Sino-EU trade volume was as high as $78.6 billion, rising 20.5 percent over the same period last year.
　　To China, the EU is the biggest trade partner and technology exporter. To the EU, China is its second biggest trade partner.
　　In fact, the EU is among the most important foreign investors in the world. According to the Organization for Economic Coopera-tion and Development (OECD), from 1995 to 2004, six of the EU’s member states, Britain, France, the Netherlands, Spain, Germany and Italy, were on the world’s top 10 investors list.
　　As of October 2005, there were 22,076 EU companies in China, with contractual investments valued at $84.7 billion, and actual input valued at $46.7 billion. In 2005, EU countries invested in 2,846 projects in China, with a total contractual value of more than $11.53 billion, and actual investment of more than $5.19 billion.
　　EU investment in China mainly is concentrated in fields involving significant technological elements. Most of these projects are of good quality and benefit, for example, the maglev train, Airbus plane and nuclear power station.
　　The trade is benefiting both sides. Thanks to inexpensive consumables from China, the EU eased its inflation pressure, which has been becoming bigger since the 1990s. When China attempted to raise the salaries of its workers, which could lead to increases in the cost of Chinese products, EU countries began worrying that inflation pressure might flare up.
　　In the long term, the EU will continue to remove parts of its industries to foreign countries by continuing investment, and China will be its top choice, for the following reasons:
　　First, in Europe, and especially in the EU member countries, the issue of an aging population is becoming increasingly serious. It is estimated that in the next 10 to 15 years, the proportion of working population to retired population will change to 1:1.5 from the current 1.5:1, which will endanger the whole social insurance system. Not counting immigrants, the proportion will be even more shocking. However, by encouraging immigration, the EU will be at risk of changing the forms of nations and cultural characteristics. To solve this problem, the EU needs to invest overseas, so as to share the results of economic developments with other regions in the world, especially East Asia, which currently enjoys the fastest development.
　　Second, the labor cost in European countries is extremely high, thus EU countries need to transfer some of their less-competitive sectors, especially those requiring a lot of labor, to overseas countries.
　　Third, East Asia, China especially, is experiencing rapid market growth. Companies in the EU must get closer to their consumers. The best choice for EU investors is a country with a huge population and increasing national income.
　　Sino-EU trade not only benefits China and European countries now, but also will benefit them more in the future. However, this is not to say that trade relations will go smoothly and without any obstacles. In fact, the truth is to the contrary.
　　Since the 1970s, European countries have launched anti-dumping stipulations on Chinese products. Last year’s textile dispute, the current anti-dumping case involving shoes and the disagreement on auto parts have been attracting attention from Chinese society.
　　There are two reasons for the trade disputes. First is the imbalance in bilateral trade. The second is that the economy in Europe is losing its internal balance. Countries in South Europe, which have labor-intensive industries such as textiles, shoe-making and household electric appliances, cannot compete with imports from China. These
　　industries are giving up efforts to improve efficiency, and instead pursuing protectionist measures. The internal decision-making
　　system of the EU, which is not perfect, raises the chances for trade disputes.
　　Due to the logic of collective action, which has fault itself, small textile and shoe-making producers in East and South Europe bound all EU members together to make the anti-dumping decisions and forced all consumers, importers, retailers and exporters to China to deal with their small industries’ depression, through a vote system leading to a consensus result inside the EU framework.
　　Under such circumstances, Chinese enterprises received unfair treatment in trade disputes. Let’s take the EU anti-dumping decision against Chinese shoes for example. The shoe-making industry, similar to the textile industry, is one of the most accepted marketized sectors in China. Compared to their European counterparts, the Chinese shoe-making industry is more of a market economy. However, the anti-dumping department of the EU on January 12 refused to acknowledge the market economy position of the 13 Chinese shoe-making enterprises that accepting investigation. And it rebutted the Chinese enterprises’ request for individual decisions on different shoemakers in China. The EU, instead, announced an anti-dumping tariff on all Chinese shoemakers. What the EU has done was against the anti-dumping agreement of the WTO, which says that different anti-dumping measures, for example, different tariff rates, should be taken in accordance with different producers or exporters due to their different prices.
　　In previous anti-dumping cases involving Chinese producers or exporters, the EU at least acknowledged Chinese industries’ market economy position. Thus, the shoe case can be regarded as a major backslide. Although the EU announced that low-cost financing, a free tariff period and other government measures should be blamed, Chinese enterprises said that those were just excuses, and the reality was to the contrary. It is well known that Chinese products’ competitive advantages are from cheap labor costs, continuous technological progress and an economic scale beyond comparison, which have nothing to do with so-called “unfair government intervention.”
　　The freedom of shoe exports to the EU is a kind of rational right in accordance with China’s WTO commitments. In the WTO agreements with China, the EU promised to cancel import quotas on Chinese shoes since 2005. In any case, from 1998 to 2004, before the quota was canceled, the capability of EU shoe producers had already decreased from 1.1 billion pairs to 700 million pairs. Meanwhile during the 2001-04 period, the EU’s quotas on Chinese shoemakers only increased an average of 5 percent to 15 percent a year. Thus, it is very unreasonable to blame the decline of shoe manufacturing in EU countries on the “unfair competition” of Chinese enterprises. The fight over shoes between China and Europe was provoked by interest groups related to EU shoe-making industries, which is an open secret inside the international trade circle.
　　Although trade and economic ties are important parts of Sino-EU relations, they are not the only ones. Since 2003, when the two sides formed an all-round strategic partnership, China-EU relations have been working on shouldering bigger international responsibilities and having more active influences, after the geopolitical conflicts and strategic threats were out of the way. Based on this, a mature bilateral relationship will not be influenced much because of temporary disputes involving certain sectors or partial interests. It will continue to step forward.
　　In the long term, we hope that EU integrity can make greater progress, while the efficiency of decision-making will be raised. In the short term, we need to strengthen the official negotiation system with the EU and organize an ally against anti-dumping by uniting consumers, importers, retailers and exporters in the importing countries inside the EU, which can be applicable to other countries or regions in the world, because it can protect the legal rights of traders.

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