Commerce Minister Gao Hucheng (right) poses after signing a free trade agreement with ssur Skarphinsson, minister for foreign affairs and external trade of Iceland, on April 15. Liu Zhen / for China Daily

Free-trade talks with EU remain a dream as push continues for investment negotiations

China and the EU need to quickly begin talks on an investment agreement, a senior Chinese diplomat in Europe says.

"Chinese entrepreneurs want to invest in Europe, so it is very urgent for us to have negotiations to ensure the security of two-way investment," says Zhang Lirong, charge d'Affaires, for the Mission of the People's Republic of China to the European Union.

"We have more areas for the two sides to invest in," Zhang said at a meeting held by the College of Europe in Belgium last month.

Over the past two years the two sides have locked horns over trade, the most notable disputes relating to solar panels and telecommunications industries.

"We don't want to see the increasing trend of protectionism especially when every country is facing difficulties in economic growth," Zhang said.

Last month Iceland became the first European country to sign a free-trade agreement with China.

According to EU figures it has 28 trade agreements in force, including one with South Korea, and talks are going on with Japan.

Last year the 27 EU countries' trade deficit with China fell from 14.8 billion to 14.5 billion euros. The EU figures suggest that even if Europe is steeped in financial crisis, investment flows to Southeast Asia are still healthy, and China and India are the main destinations of outward FDI.

"The relative importance of China as a destination for EU FDI has grown steadily over recent years, and outward FDI stocks reached 75.1 billion euros by the end of 2010, which was higher than in South Korea, India and Indonesia," an EU report says.

Xiang Yu, second secretary of the Mission of China to the EU, said: "We are talking with the EU about starting talks on bilateral investment treaties and we hope we can start negotiations this year.

"China very much welcomes FDI from the EU and we really need to work together to seal negotiations so that bilateral investment is more secure."

The United States is also seeking a single-market agreement with the EU, and preferential trade agreements with some Asian countries. On March 12 the European Commission decided to ask for the go-ahead on negotiations for the Transatlantic Trade and Investment Partnership with the US.

The commission says that when a deal is reached, it would be the biggest bilateral trade deal ever negotiated and could add about 0.5 percent to the EU's annual economic output.

Some analysts argue that a EU-US single market would endanger the European economy.

"If the EU established a single market with the US, US companies will have free access to the European market," says Henri Malosse, president of the European Economic and Social Committee. "At the same time we won't have the same access because of different regulations between different states in the US. I think it's a big danger for us."

Carlier, of FCA Consultancy Services in Belgium, which advises companies wishing to invest in China and Europe, said agreements between China and the EU and China and the US would "contribute to the mutual interest".

"I think nowadays we are more and more integrated; economies are not isolated. If goods produced from China cannot go to the EU, it's not only a problem for China but also for the EU."

Cooperating with the US is a way for European countries to maintain their power on the world stage, says Cui Hongjian, director of European Studies of China Institute of International Studies.

"It is sensible for the EU to cooperate with the US to regain power. We can tell that Europe wants to show its defensive position in other areas."

Talks about free trade are now focusing more on services and green industries than traditional sectors, so the EU and the US are joining to set rules and standards in these areas, he says.

It is still too early to tell how the Chinese government will deal with this issue, but the country has shown its flexibility and willingness to work with others, he said, and has shifted foreign policy from one driven by economics into a more political and diplomatic focused one.

"For the China-US relationship, this new direction offers better bilateral opportunities."

The European Union's reluctance to begin free-trade talks with China are in marked contrast to the enthusiasm of Iceland, which signed its landmark deal in Beijing on April 15.

Iceland's Prime Minister, Johanna Sigurdardottir, said the country's aim was to diversify trade and reduce the trade deficit.

The agreement should result in lower prices for Chinese goods in Iceland and make Icelandic companies more competitive with their exports and services in China, she says.

China's National Bureau of Statistics says bilateral trade between the two countries was worth $152 million in 2011, 35 percent more than the previous year.

Switzerland and China concluded their eighth round of free-trade negotiations in Beijing in March. Denmark is also seeking free-trade cooperation with China because trade between the countries has surged in recent years, says Pia Olsen Dyhr, Denmark's minister for trade and investment.

Iceland is a member of the European Economic Area, giving it access to the EU's single market, to which 80 percent of its exports went last year. It lodged an application for membership of the EU in 2009.

tuoyannan@chinadaily.com.cn

(China Daily 05/03/2013 page19)