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EU and emerging economies China, India and Russia.

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Presentation on theme: "EU and emerging economies China, India and Russia."— Presentation transcript:

1 EU and emerging economies China, India and Russia

2 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

3 Russia

4 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 Space → 2004: EU-Russia WTO negotiations 2006: renegotiation of PCA?

5 EU merchandise trade with Russia Source: Eurostat

6 Russia’s trade EXPORTSIMPORTS Source: Eurostat and Russia’s State Statistics Service

7 EU = Russia’s main trade partner – by a long way (over 50% trade) Russia = EU’s 4 th major trading partner – but only 6.3% trade –EU a much more diverse and mature trade structure

8 EU Imports from Russia €bn Source; Eurostat

9 EU Exports to Russia €bn Source; Eurostat

10 Key relationship Proximity Post-Cold War era Strategic issues – e.g. energy Political problems –Chechnya –Kaliningrad

11 Location of Kaliningrad

12 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

13 Four Common Spaces 1.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

14 2.Common Space on Freedom, Security and Justice –Human rights, organised crime, terrorism 3.Common Space on External Security –Conflict prevention, international bodies 4.Common Space on Research, Education and Culture

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

16 NOTE: EU’s links with Russia more formally and extensively expressed than with other emerging economies at this stage. A reflection of more urgent strategic focus

17 CHINA

18 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

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

20 EU merchandise trade with China Source: Eurostat Average growth imports – 16.9% p.a. Average growth exports – 14.3% p.a.

21 Top 10 EU exporters to China Source: Eurostat

22 Top 10 EU importers from China Source: Eurostat

23 EU trade by product with China Source: Eurostat

24 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 consumer –2 nd largest energy consumer behind US –Generally becoming more competitive ‘Superpower of mass consumption’ – cannot afford to ignore it

25 Investment: –2000 onwards - $4.2 bn U FDI to China on average p.a. –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

26 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 relations

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

28 China’s political objectives Strengthen high-level visits and political dialogue ‘Strictly abide by the one-China principle’ Encourage Hong Kong and Macao’s cooperation with EU ‘Promote the EU’s 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

29 China’s 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

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

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

32 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

33 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)

34 Bra Wars – 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 EU within its rights as par of rules governing China’s WTO accession –Pullovers, men’s trousers, blouses, T-Shirts, dresses, bras, flax yarns, cotton fabrics, bed linen and table and kitchen linen

35 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

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

37 Manufacturers pressurised their governments (France, Spain, Italy, Greece, Portugal, Lithuania) 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

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

39 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?

40 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

41 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 China’s links with EU weaker than those with US and Japan (4,600 Japanese jvs in Shanghai alone)

42 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.

43 The Future More trade disputes? Greater formalisation of EU-China links – –8 th 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

44 India

45 Emergence of India Overshadowed by China – increasingly recognised as awakening sleeping giant Trend growth of 7-8% - aiming higher economic reforms began in earnest – some current problems Integrating with world economy as never before but –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

46 Evolution of formal EU-India links 1963: India establishes diplomatic relations with EEC 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: 6 th EU-India summit issue Joint Action Plan setting out steps needed to transform bilateral ties to strategic relationship

47 India accounts for 2% of EU imports and exports Trade in manufactured goods dominates both ways EU is India’s largest trading partner and its main source of FDI India = EU’s 12 th trading partner and accounts for 1.7% trade – EU share in FDI approvals around 25%

48 EU merchandise trade with India Source: Eurostat Average growth exports – 5.7% p.a. Average growth imports – 6.1% p.a.

49 EU trade by product with India Source: Eurostat €bn

50 Main EU traders with India – 2004 (€bn) Source: Eurostat

51 India – FDI by source (Jan 2002-Oct 2005) Source: FT – % FDI in ICT 13% in electronics 12% in business and financial services 8% heavy industry

52 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 investment India – less developed framework than Russia or China – but one for the future


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