"At the moment, I have decided that the European Union should be an observer of the case rather than a party to it," Mandelson said at a luncheon party hosted by Guan Chengyuan, Chinese ambassador to the EU.

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The US government announced its decision last week to file two cases with the World Trade Organization (WTO) against China over the issues concerning intellectual property rights (IPR) and accession to China's publication market, a move criticized by China as contrary to the mutual understanding about properly solving trade disputes.

"I, as you know, favor dialogue over WTO cases. Dialogue is my preference," Mandelson told Xinhua.

The EU trade chief cited the negotiated solution to the Sino-EU trade row over textiles in 2005 as a success model. Mandelson himself led the talks with China, which helped to avert a looming trade war between the two trading partners with a mutually beneficial compromise.

While acknowledging that the Chinese government has made efforts to better protect IPR and combat piracy, Mandelson urged China to do more in law enforcement and implementation of bilateral agreements in order to relieve the concern of EU investors.

"I have come under some pressure to join the United States in this case ... it is possible that the events may force me to rethink this decision," Mandelson warned.

Chinese ambassador Guan Chengyuan agreed with Mandelson that dialogue, instead of legal complaints, is the best solution to trade disputes, pointing out that China's efforts should be recognized.

"It is our consistent approach to solve problems through dialogue and consultation, which is beneficial to the promotion of bilateral economic and trade relations," Guan said.