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EU and emerging economies


EU and emerging economies China, India and Russia What are emerging/transitional economies? Moving from closed to open economy Perhaps from state to market economy ... – PowerPoint PPT presentation

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Title: EU and emerging economies

EU and emerging economies
  • China, India and Russia

What are emerging/transitional economies?
  • Moving from closed to open economy
  • Perhaps from state to market economy
  • Developing key market economy institutions
  • Likely to be undergoing economic reform
  • Increasing investment and above average growth

Evolution of EU-Russian relations
  • 1991 EU delegation set up in Moscow
  • 1997 Partnership and Co-operation Agreement
    (PCA) in force
  • 1999 EU Strategy Paper on Russia
  • 2000 framework for Energy Dialogue
  • 2001 High Level Group on Common European Economic
  • ? 2004 EU-Russia WTO negotiations
  • 2006 renegotiation of PCA?

EU merchandise trade with Russia
Source Eurostat
Russias trade - 2004
Source Eurostat and Russias State Statistics
  • EU Russias main trade partner by a long way
    (over 50 trade)
  • Russia EUs 4th major trading partner but
    only 6.3 trade
  • EU a much more diverse and mature trade structure

EU Imports from Russia
Source Eurostat
EU Exports to Russia
Source Eurostat
Key relationship
  • Proximity
  • Post-Cold War era
  • Strategic issues e.g. energy
  • Political problems
  • Chechnya
  • Kaliningrad

Location of Kaliningrad
  • PCA legal foundation of EU-Russia
  • Covers many areas
  • political dialogue, trade, business and
    investment, financial and legislative
    co-operation, science and technology, education,
    energy, environment, transport, culture, etc
  • Institutional framework

Four Common Spaces
  • Common European Economic Space
  • Greater compatibility between EU and Russia
  • Ultimate aim integrated market
  • Regulatory convergence?
  • Areas targeted standards, technical regulations,
    customs, financial services, accounting,
    transport, procurement, telecommunications,
    competition, agriculture
  • Russian sensitivities
  • More developed than traditional agreements

  • Common Space on Freedom, Security and Justice
  • Human rights, organised crime, terrorism
  • Common Space on External Security
  • Conflict prevention, international bodies
  • Common Space on Research, Education and Culture

Key issues
  • TACIS aid programme
  • Energy
  • Environment
  • Nuclear energy
  • Further development of four spaces
  • Relations between EU members and Russia

  • NOTE EUs links with Russia more formally and
    extensively expressed than with other emerging
    economies at this stage.
  • A reflection of more urgent strategic focus

Evolution of formal EU-China links
  • 1975 formal EU-China relations begin following
    normalisation of US-China
  • 1979 Commission President Roy Jenkins ? China
  • 1980s broadening of bilateral co-operation, e.g.
  • scientific co-operation, business management
    training, rural development
  • 1985 Trade and Economic Co-operation Agreement
  • 1988 EU delegation opens in China
  • 1989 Tianamen relations frozen and sanctions

  • By 1992relations normalised - arms embargo
  • 1995 1st European Commission strategy paper on
    EU-Chinese relations
  • 1998 First EU-China summit
  • 2000 EU-China conclude bilateral negotiations on
    Chinas WTO accession
  • 2001 European Commission strategy paper on
  • 2003 1st Chinese policy paper regarding the EU
  • 2004 EU becomes biggest trading partner of China
    and China, the EUs 2nd biggest
  • Late 2005 8th EU-China summit

EU merchandise trade with China
Average growth imports 16.9 p.a. Average
growth exports 14.3 p.a.
Source Eurostat
Top 10 EU exporters to China - 2004
Source Eurostat
Top 10 EU importers from China - 2004
Source Eurostat
EU trade by product with China - 2004
Source Eurostat
Why does China matter to Europe?
  • Growing importance
  • 2004 European Council discuss China twice as
    often in 2003
  • Rapid economic development
  • Large private sector
  • Biggest telecommunication market/largest steel
  • 2nd largest energy consumer behind US
  • Generally becoming more competitive
  • Superpower of mass consumption cannot afford
    to ignore it

  • Investment
  • 2000 onwards - 4.2 bn U FDI to China on average
  • Stocks of EU FDI over 35 bn
  • Corporate Europe needs Chinese doors open
  • NL Phillips one fifth of employees in China
  • 2004 Nokia, Siemens, Eriksson establish research
    centres in China
  • Join forces with Chinese players

Arms embargo
  • France and Germany want to lift, because
  • Confrontational rather than co-opertive
  • Economic interests generally
  • Helps weapons producers in UK and France
  • Germany wants support from China to help it
    become member of UN Security Council
  • Helps multpolarity
  • EU bowed to US pressure does not affect

What does China want from Europe?
  • Wants polycentric rather than unipolar world
    order (like Chirac)
  • Access to Europes markets
  • The common ground between China and the EU far
    outweighs their disagreements
  • Chinas EU Policy Paper
  • Political, economic and cultural objectives

Chinas political objectives
  • Strengthen high-level visits and political
  • Strictly abide by the one-China principle
  • Encourage Hong Kong and Macaos cooperation with
  • Promote the EUs understanding of Tibet
  • Continue the human rights dialogue
  • Strengthen international cooperation
  • Enhance mutual understanding between Chinese and
    European legislative organs
  • Increase political exchanges between political
    parties and the EU

Chinas economic objectives
  • Economic co-operation and trade, e.g.
  • Ease restrictions on high tech exports
  • Reduce and abolish anti-dumping policies
  • Compensation for any losses from enlargement
  • Boost EU-China coordination in WTO negotiations
  • Strengthen dialogue on investment
  • More EU development aid e.g. environment, HRD
  • Greater cooperation quality supervision,
    inspection, quarantine for health, security,
    safety etc and rapidly address issues affecting
    market access

  • Financial cooperation
  • Market access banks, insurance, etc
  • Agricultural cooperation
  • Environmental co-operation
  • IT cooperation
  • EU participation in Chinas IT promotion
  • Information Socity
  • IP rights and technical standards
  • Energy cooperation
  • Transport cooperation especially maritime and
    civil aviation

Education, Science-Technology, Culture, Health,
  • Co-operation in science and technology
  • Cultural exchange
  • Cooperation in education
  • Cooperation in health and medical care
  • Press exchange
  • Personnel exchange

Sectoral dialogues
  • Not headline grabbing but important cover over
    20 areas. Examples
  • Competition law many exchanges at expert level
    draft similar to EU model
  • Internal market like EU, China wishes to end
    market fragmentation free movement of people,
    goods, services, procurement
  • Regional policies and other income
    re-distribution mechanisms

Areas of trade tension
  • EU largest trade deficit with any partner
  • Reflects market obstacles?
  • EU wishes to remove obstacles to trade (price
    controls, standards, etc)
  • Obstacles to investment geographical
    restrictions, joint venture requirements,
    discriminatory licensing procedures, closure of
    sectors to foreigners)

Bra Wars
  • 1.1.05 end of global textile and clothing
    quotas end of 30 years of protection in US,
    Canadian and European markets
  • ? big surge in Chinese clothing exports to EU
    (sales of some items up by 500) complaints
    of injury from European producers
  • ? June 2005 agreement quotas on 10 items until
    2008. EU within its rights as par of rules
    governing Chinas WTO accession
  • Pullovers, mens trousers, blouses, T-Shirts,
    dresses, bras, flax yarns, cotton fabrics, bed
    linen and table and kitchen linen

  • Quotas quickly breached by early August 75 mn
    items stuck in warehouses
  • 5 September deal to release goods
  • All goods to be released but half to count
    against 2006 quota
  • China agreed not to export any more pullovers,
    trousers and bras in 2005

Interested parties
  • Consumers clothing prices fhave fallen 40 in
    last 8 years
  • Retailers rely heavily on China
  • produces about ¼ of worlds clothing
  • Fashions from catwalk to clothes rail in 304
  • People want cheap goods and Italy does not make
    them. Protectionism does not work.
  • Stuart Rose, Chief Executive of Marks and Spencer

  • Manufacturers pressurised their governments
    (France, Spain, Italy, Greece, Portugal,
  • Germany, Denmark, Netherlands, Finland and Sweden
    argued against protection
  • Pre-quotas
  • losers from import surge not European producers
    but traditional EU suppliers Pakistan,
    Indonesia, Thailand, Philippines, Taiwan, etc
    exports to EU fell 10-60 in H105

  • Post quotas
  • Retailers unable to buy from China looked to
    other low cost producers Turkey, Roamnia,
    Bangladesh, Sri Lanka

  • Dispute over narrow range of products big rise
    in volume, smaller increase in value implies
    prices falls
  • Dispute affected many producers outside Europe
    and China
  • Will problem re-emerge?

Shoe wars?
  • 2006 Mandelson introduced anti-dumping duties on
    footwear import from China and Vietnam f
  • Opposition from some member states e.g. Sweden
    wants consumers interests to be considered.
  • Many European companies sub-contract in China
  • Encourage Chinese companies to compete on more
    than just price? Brands, etc

Nature of and dangers to relationship
  • Non-strategic competitors geopolitics
  • Common ground outweighs areas of agreement
  • Disagreements hurt both sides e.g. textiles
  • Relationship affected by US (e.g. arms embargo)
    influence could decrease
  • Chinas links with EU weaker than those with US
    and Japan (4,600 Japanese jvs in Shanghai alone)

Challenges to relationship
  • Europe intergovernmental vs supranational
  • EU and its members both have relations with China
  • Increasing competitive challenge throughout most
    sectors, including high tech.

The Future
  • More trade disputes?
  • Greater formalisation of EU-China links
  • 8th EU-China Summit agrees to negotiate new
    China-EU Framework Agreement to reflect the
    full breadth and depth of the strategic
    partnership between China and the EU
  • Compare to Russian PCA

Emergence of India
  • Overshadowed by China increasingly recognised
    as awakening sleeping giant
  • Trend growth of 7-8 - aiming higher
  • 1991 - economic reforms began in earnest some
    current problems
  • Integrating with world economy as never before
  • Tariffs remain high
  • Indian goods account for 0.8 world exports
    (compared to 6.4) for China need further
    infrastructural and regulatory reform
  • IT driver but not without problems

Evolution of formal EU-India links
  • 1963 India establishes diplomatic relations with
  • 1971 EEC GSP scheme includes India
  • 1981 EEC-India 5 year Commercial and Economic
    Cooperation Agreement
  • 1983 EC delegation established in India
  • 1996 Commission Communication EU-India
    Enhanced Partnership
  • 2000 first ever EU-India Summit
  • 2005 6th EU-India summit issue Joint Action Plan
    setting out steps needed to transform bilateral
    ties to strategic relationship

  • India accounts for 2 of EU imports and exports
  • Trade in manufactured goods dominates both ways
  • EU is Indias largest trading partner and its
    main source of FDI
  • India EUs 12th trading partner and accounts
    for 1.7 trade
  • 1991-2002 EU share in FDI approvals around 25

EU merchandise trade with India
Average growth exports 5.7 p.a. Average growth
imports 6.1 p.a.
Source Eurostat
EU trade by product with India - 2004
Source Eurostat
Main EU traders with India 2004 (bn)
Source Eurostat
India FDI by source (Jan 2002-Oct 2005)
  • 35 FDI in ICT
  • 13 in electronics
  • 12 in business and
  • financial services
  • 8 heavy industry

Source FT 26.01.06
Joint Action Plan
  • Mechanisms for relationship
  • Political dialogue and cooperation
  • Culture
  • Policy dialogue and cooperation
  • Development of trade and investment
  • Establish High Level Trade Group to consider ways
    to deepen relationship, including possible launch
    of bilateral talks on broad-based trade and
  • India less developed framework than Russia or
    China but one for the future