EU seeks China accord as first step to trade deal

The EU wants to negotiate an investment protection accord as a first step towards a wider Free Trade Agreement with China, one of its biggest trading partners despite a series of tit-for-tat disputes, EU officials said Thursday. "We want to see this as a first step towards" an FTA, one EU official said, asking not to be named. "It is an important step." The European Commission announced earlier Thursday it was ready to start talks on an China investment agreement which "will help deepen our ties and sends the signal that we are firmly committed to building a strong partnership." A single EU accord would replace some 25 different bilateral agreements between member states and China, with the aim of improving "the protection of EU investments in China as well as Chinese investments in Europe, improving legal certainty regarding treatment of EU investors in China, reducing barriers to investing in China and, as a result, increasing bilateral investment flows." The Commission said "it should also, crucially, cover improved access to the Chinese market," citing a key and longstanding EU concern about trade with China. The EU officials stressed that current trade disputes -- over telecoms, solar panels and steel tubes -- had no direct connection with the investment accord announcement although the two would be linked "in the big picture." Analysts say the recent increase in trade tensions could reflect the fact that the EU and China are both feeling the pressure from a sharp economic slowdown. The underlying relationship, however, is so important that Brussels and Beijing ultimately have every incentive to settle their differences, they say. China has raised the possibility of a FTA with the EU several times, but Brussels has downplayed the prospect, favouring an investment accord first. The EU along with many others has had doubts about the role the state and the ruling Communist Party plays in the Chinese economy, but years of dramatic market reforms means this is no longer such a concern. An investment deal "is good for China ... because our companies will have better access to the market," another EU official said. It also "fits in ... it is good for China" as it liberalises its economy even further, the official added. China itself is clearly pushing the FTA agenda. Chinese Premier Li Keqiang, travelling to Switzerland, said Thursday he saw an upcoming FTA with the EU neighbour as a touchstone for Beijing's growing international ties. In an opinion piece published in the Zurich daily Neue Zuercher Zeitung, Li said the FTA deal and his trip were "symbolic of China's openness to the outside world." "Switzerland will be the first continental European country, as well as the first in a list of the 20 largest global economies, to have concluded a key free-trade deal with China," said Li, who travels later to Germany. "This will not only enhance our economic and trade cooperation but also send the world a strong signal about the fight against trade and investment protectionism, as well as the liberalisation and facilitation of trade," he said. The investment agreement announcement also comes as the EU begins talks with Washington on what could be the world's largest FTA. China eyes that development and similar US initiatives in the Asia-Pacific region with some concern, fearing that it will lose out despite EU reassurances that a deal with Washington will also ultimately benefit Beijing. The Commission said there was "huge potential" to boost investment ties which are relatively modest considering the size of the overall trade relationship, with China counting the EU as its largest export market. In 2011, European companies invested 17.5 billion euros in China, with flows the other way just 2.8 billion euros but one EU official said the sums were much more balanced last year. On the trade front, EU exports to China totalled $212 billion, with imports of $334 billion in 2012.