Dan Steinbock

Much to lose, everything to gain

By Dan Steinbock (China Daily)
Updated: 2010-07-08 08:03

In the past, former French president Jacques Chirac's "multipolar world" shared many affinities with Chinese thinking. Now President Nicolas Sarkozy has a different approach to global problems. But despite his approval ratings have plunging trade with China remains a high priority in Paris.

Today, Britain's deficit amounts to 11 percent of its GDP. After the elections, Prime Minister David Cameron warned of "decades" of austerity. In the past, Britain has been the largest EU investor in China. The Sino-British trade stands at $59 billion. With liberal democrats, the conservatives seek "closer engagement with China".

Owing to its debt problems, Italy is increasingly in the EU's spotlight. As Prime Minister Silvio Berlusconi seeks to cut public expenditure by about $31 billion, Rome has been swept by demonstrations. But despite its domestic challenges, Italy would like to increase the presence of its companies in China and attract Chinese investment.

Until now, China's most important EU trading partners have stayed the course. The same applies to small EU member countries that produce advanced hi-tech goods, from Swedish cars to Finnish mobile phones.

The turmoil heralds increasing concern over the pace of growth in the world economy. In the EU, the existing policies are expected to result in stagnation, deflationary pressures, a softer euro and declining purchasing power.

In the past, Chinese and European leaders have agreed to step up efforts to promote trade and investment in order to deal with the economic turmoil. The ongoing crisis could open new investment opportunities in EU's cutting-edge markets, too. And Chinese capital and employment could certainly benefit EU countries.

Through the High Level Economic and Trade Dialogue, the EU and China could seize the opportunity and use all possible avenues to take their economic cooperation to a new level. Yet the potential for increasing cooperation has been replaced by the reality of increasing friction.

Recently, the EU was ranked among the top five "offending nations" in all of the criteria of the Global Trade Alert, which has been monitoring the rise of protectionism.

In the past few days, the US and the EU have created import barriers for three kinds of Chinese products. It shows the global crisis is far from over. In the EU, the darkest days are still ahead. What the world needs now are sustainable sources of growth.

China and a few other large emerging economies have the potential to drive the world economy in the coming years. So, the EU and China have little to gain through friction - and everything to win through cooperation.

The author is research director of International Business at the India, China and America Institute, an independent think tank in the US

(China Daily 07/08/2010 page9)