Monthly Archives: April 2013

Why does the EU trade with China?

Trading with China. Is it worth it?

Trading with China. Is it worth it?

Reports coming out of Syria in the last week suggest that the Assad regime has used chemical weapons against civilians, which once again brings into focus the impasse on the UN Security Council with regard to the international community’s response.

As has been the case since the Syrian crisis began, Russia and China remain opposed to intervention, whereas the US, Britain and France want to keep intervention open as an option.

Why Russia and China have taken this position, in the face of of overwhelming evidence of serious human rights abuses, is presumably explained by some article of faith in their approach to geo-politics. China’s response is perhaps the least surprising of the two, given that the Communist Party of China only cares about one thing: the Communist Party of China.

China’s apparent disdain for the well-being of anyone who isn’t Chinese, or indeed, anyone who isn’t a high ranking official in the Communist Party of China, begs the question as to why other nations, or trading blocs like the EU, are so willing to trade with China.

If it were the case that the Chinese population had an insatiable desire to consume products and services produced in the the EU or the US, wherein millions of jobs were created in the process, the jagged edges of the Chinese regime could perhaps be overlooked.

What is peculiar is that the opposite case is true: EU and US consumers can’t get enough of Chinese products, which has led to a economic boom in China and the perennial decline of the manufacturing in the west.

The EU’s own summation of its trade relationship with China is telling. In 2011, the EU recorded a €159bn trade deficit with China, or in other words, we bought €292bn worth of plastic crap from them, while they only bought €136bn worth of cars, chemicals, movies and software from us.

Furthermore, the EU doesn’t appear to be very happy with its trading relationship with China. For instance, it has complained that 73% of all fake goods seized at EU borders come from China (much of the IP of which is owned by EU citizens) and that of 22,000 telecommunications licenses issued in 2011, only 23 were awarded to foreign companies.

Overall, a picture emerges of a very imbalanced relationship, where one party is flooding the market of the other with cheap rubbish produced under very suspect labour and environmental laws, while at the same time doing its utmost to prevent that party from entering its markets on an equal footing to indigenous companies.

So why does the EU persist with this relationship? The cost, both in terms of unemployment in the EU, the EU’s trade balance and the wider impact of China’s industrialisation on the global environment, would appear to suggest that the benefits are limited, if any.

The long term thinking seems to be the short term pain is worth it, so that EU companies can gradually eat into the vast Chinese consumer market as China slowly deregulates.

But really, is this what EU citizens want? Would we not be better making our own plastic toys, shoes, mobile phones and toothbrushes, and paying a bit more for them, if it meant there were more lower skilled jobs available? The net effect of this on EU states who are struggling with unsustainable social welfare burdens would be significant.

And would we not be better off if China’s wasn’t churning out millions of tonnes of Co2 emissions into the atmosphere, well beyond China’s borders, in order to make all this rubbish for a euro less than we can make it ourselves?

And would Africans not be better off if Chinese oil magnates were not buying up half the Continent in order to supply energy for the the next phase of their industrial expansion, while the EU struggles with a conversion to renewables?

And ultimately, would we not be better off if China’s continuing ascent up the Superpower league, financed by their trade deficit with the EU and US, were thwarted, so that when situations arise like that in Syria, the UN Security Council could deal with it on a humanitarian basis, rather than having to bow to Chinese paranoia about global politics?

What am I missing here?