First we had bra wars. Then shoe wars. Is yet another China-Europe trade row brewing? The Economist certainly thinks so. The China trade syndrome explains why Europe's next big globalisation row will be over trade with China. It gives this analysis of the reasons:
Three linked China problems are now causing big ructions.
The first is one of sheer scale. Low-key policies that seemed adequate a couple of years ago have struggled to keep pace with the explosive growth of trade. Two-way trade between the EU and China expanded by over 20% last year to a total value of €254 billion ($319 billion), and the trade balance has swung sharply in China's favour. Compared with America, the EU has shunned confrontation, preferring dialogue with China over such concerns as the deficit or intellectual property. But this calm approach may be a harder sell when the bilateral trade deficit with China is running at an average of €15m an hour.
The second problem is that China ignores gentle hints to stick to commitments it made when it joined the World Trade Organisation. The charges are numerous: there are perennial (and hard to prove) accusations about state subsidies and a failure to guard against the theft of intellectual property. A bleak report by the EU Chamber of Commerce in China notes a fresh threat: the unequal treatment of foreign companies by newly muscular Chinese regulators. Chinese officials are even accused of diverting EU energies into “process”—endless argument over when and with whom meetings will take place. It does not help that many commissioners fall for this nonsense, tripping over each other in their eagerness to visit China and meet the right officials. The 27 member countries are worse, eagerly undermining agreed positions in a quest for national advantage.
The third problem is China's currency, the yuan, which has lost about 40% of its value against the euro since 2000, making Chinese exports ever cheaper. President Nicolas Sarkozy of France loudly argues that euro-area governments should join forces with the European Central Bank (ECB) and back American demands for the Chinese to let their currency appreciate (it is still loosely pegged to the dollar). But the sad reality is that any finger-wagging by the Europeans might serve only to expose their impotence. Noting the euro's steady rise against the yuan, several American analysts conclude that the Chinese have taken a deliberate decision to allow Europe to foot the bill for any small concessions they may offer to America on the yuan.