Tuesday, April 05, 2005

EU & China on collision course

Today the FT reports that the EU is to adopt rules for curbing Chinese textiles

The European Union's response to higher Chinese textile exports shows "a growing and worrying protectionist trend" which could eventually undermine the EU's economic competiveness, Sweden's trade minister has warned.

Highlighting a growing divide within the 25-nation bloc over the benefits of trade liberalisation, Thomas Ostros told the FT: "There is an increase in protectionist ideas which I feel is very troublesome, not least in the light of the Lisbon strategy (to turn the EU into the world's most competitive economy.) In the long run, it will mean less economic growth and fewer jobs if we use that type of strategy."

Curiously some in the EU (Chirac, Schroeder) are seeking to lift the ban on selling arms to China. Seems the EU is confused about its policy toward China. The Swedish Minister has a point but then the US government is coming under pressure to put up barriers to China too, and there is the samll point that protectionism is nothing new in the EU. Some would also argue that jobs are being lost to China.

China is causing more than a few headaches in the "western economies". Rapid Chinese economic growth is one of the reasons why oil production needs increasing, and, I might add, why the price of oil has risen so dramatically. Then there is the vexed question of the undervalued Chinese currency. The dragon has been woken up; just wait until it starts to roar and breathe fire!