Germany to help China in trade disputes with Brussels

The German Chancellor Angela Merkel, seven government ministers and a large business delegation arrived in the morning of 29 August 2012 at Beijing Airport. On that occasion the two countries inked multifaceted economic, political and cultural agreements spanning in the years to come. (German Federal Government photographic library).

The German Chancellor Angela Merkel, seven government ministers and a large business delegation arrived in the morning of 29 August 2012 at Beijing Airport. On that occasion the two countries inked multifaceted economic, political and cultural agreements spanning in the years to come. (German Federal Government photographic library).

The visit of the new Prime Minister of the People’s Republic of China and party secretary of the State Council, Li Keqiang to Germany paid tangible dividends. After meeting with the German Chancellor Angela Merkel he got an official and public promise from her that Berlin will intervene in the Brussels procedures, to cool down European Commission’s aggressive action against alleged Chinese state subsidies to a number of companies and their possible price dumping practices in EU markets.

A trade war?

The European Sting on 16 May wrote that, “European Union Trade Commissioner, Karel De Gucht, announced yesterday that, “The European Commission has today taken a decision in principle to open an ex officio anti-dumping and an anti-subsidy investigation concerning imports of mobile telecommunications networks and their essential elements from China. Without naming individual firms this Commission decision is directly targeted against two international companies originating from China, the Huawei Technologies Co. giant and the smaller firm ZTE Corporation. The Commission opens this investigation on Chinese telecommunication equipment producers for allegedly using price dumping practices and receiving state subsidies”.

Apart from that the Commission has until this June to decide, if the EU will impose punitive import duties on Chinese solar panels imports. On the same line of action the Commission launched on 28 February an anti-dumping investigation into imports of solar glass from China. At the beginning of the year (28 January) the European Sting run an article on the possibility of a trade war with China.

According to this analysis “The key question is if we are witnessing the beginning of a trade war between the West and China. Is there any logic in it? Unfortunately, both the EU and the US economies seem very fragile. The European Union actually is in recession as from the second half of last year. Its relations with China constitute a major hope for returning to growth in 2013. If China chooses to wage ‘a trade war’, hopes for return to growth will be ruined for the export oriented Eurozone countries”.

Berlin backs Beijing

The answer to this question came this weekend from Berlin. Germany, the most export oriented EU country, was the first to pull back from any punitive trade action against China. Chancellor Merkel said plainly that Berlin will ‘intervene’ in the Brussels Commission bureaucracy to bring the EU and China to the negations table. According to press reports the German leader stressed “We should very intensely use the next six months, and Germany will do everything to ensure that the talks will really advance”.

This statement coming from Germany makes sense, because this country is probably the only one in Eurozone to run a positive trade account with China. Overall the EU27 trade deficit with China in January-February 2013 was estimated by €25.6 billion. It is quite logical then that Berlin is trying to cool down the aggressiveness of the rest of the EU countries towards the Chinese exports.

According to the German Chancellery, “forty years after diplomatic relations were established cooperation between Germany and China is closer than ever. The fortieth anniversary is to be marked by a China Year in Germany and a wide spectrum of cultural events in both countries. In 2012 Germany opened a new Goethe-Institut and another Consulate General in China”. The Chancellor visited China in August 2012.

Before Germany the Chinese Premier Li Keqiang visited Switzerland last week on the occasion of a conclusion of the free trade agreement between the two countries.

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