EU'S Trade Attitude Towards China Has Begun To Harden.

Over the years, the EU has been more moderate in dealing with China's contradictions in trade, exchange rate and human rights, but now the EU is adopting a tougher and "American style" attitude.

The EU's trade deficit with China has expanded considerably and may soon surpass the US trade deficit with China for the first time. This situation has prompted the EU to change its attitude towards China.

Washington welcomes this.

The US government officials see the EU as a strong potential ally, and think that the two sides can unite to persuade China to open its domestic market and make the renminbi appreciate, thereby reducing exports.

But if China is changed to feel difficult for the United States, it will probably be more difficult for the EU.

This is because a strong economy like China can easily make use of the differences between European countries, causing competition among European Member States.

Analysts have pointed out that China has become a very important growth market for European companies. If the EU tries to restrict China's exports, Beijing has the ability to retaliate.

China can impose more restrictions on foreign investment or increase tariffs on imports from the EU.

Patrick, a professor of economics at Institut D'Etudes Politiques De Paris (SciencesPo), said that a heavy blow to China might hit Europe at the same time, PatrickMesserlin said.

The European Union fully demonstrated its new attitude towards China at the summit meeting held in Beijing on Wednesday.

European Union Trade Commissioner Mandelson (PeterMandelson) said he plans to carry out "difficult talks" with Chinese government officials.

Earlier this week, Mandelson delivered two tough speeches in Beijing, accusing China of product quality and inadequate protection of intellectual property rights.

According to the news agency, after the speech of Mandelson, Wu Yi, vice premier of China in charge of trade, said she was "very unhappy" with Mandelson's comments.

Mandelson recently warned that the EU's widening trade deficit with China is a "time bomb" set by the policy, and there may be a wave of protectionist measures in Europe.

At present, the EU is deciding whether to impose anti-dumping duties on Chinese steel and has threatened to extend the quota period for Chinese textiles.

Germany, a major European trading power, has recently challenged China's human rights issue.

Two months ago, German Chancellor Merkel (AngelaMerkel) invited Darai Lama to meet in Berlin. Her predecessor and herself had never done anything like that before.

The Chinese government therefore cancelled a series of talks with German government officials and business people.

For many years, the European Union has always adopted a consolation attitude towards China and considered that the trade deficit is an issue of the United States.

When China joined the World Trade Organization (WTO) in 2001, it was the United States rather than the EU that took a tough stance in negotiating the terms.

After the coalition forces entered Iraq in 2003, many EU members also viewed China as a force that should be encouraged to balance the US.

In 2005, despite the strong opposition of the United States, the EU intends to lift the arms embargo imposed after the Tiananmen incident in 1989.

But as the EU's trade deficit with China continues to widen, the resulting worries have led to an increasingly tense relationship between the EU and Beijing. So now the new heads of the major EU member states are beginning to move closer to Washington.

The talk of lifting the arms embargo disappeared.

Since 2001, the EU's trade deficit with China has expanded two times.

In the first 8 months of 2007, the EU's trade deficit with China amounted to US $133 billion 300 million, an increase of 35% over the same period last year.

Over the same period, the US trade deficit with China amounted to US $164 billion, an increase of 14% over last year.

Trade officials in Brussels say that in the coming months, the EU's trade deficit with China is likely to exceed the US trade deficit with China for the first time.

The change of European attitude is obvious on the issue of RMB exchange rate.

In the past, the EU only urged China to reassess the renminbi in private, but remained silent in the United States' public statements.

However, this year, though the renminbi has strengthened against the US dollar, it has fallen by 6% against the euro, expanding the cost advantage of Chinese companies to European competitors.

On Wednesday, Tyse, the European central bank governor, publicly appealed to Beijing to increase the exchange rate of the renminbi against the euro in Beijing. He said in an interview with reporters, "we have been pmitting this message for a long time."

The only difference is that the EU is very cautious compared with other countries. "

Washington welcomes the open attitude of the European Union.

In a speech this week, Holme, the special envoy of the US Treasury Department, AlanHolmer, talked about the European Union. "I think the international voice on this issue is louder and better."

In a speech on Wednesday, Chinese Premier Wen Jiabao retorted that the recent decline in the value of the renminbi against the euro was mainly due to the weakening of the US dollar.

China also agreed to jointly set up a working group on Trade and exchange rate policies with the European Union this week, although economists believe that this is largely a form.

China's import tariff level has been relatively low, averaging 9.9%, compared with 12.3% in Brazil and 19.2% in India.

But the European Union's dissatisfaction is mainly related to lucrative services such as banking, insurance and telecommunications. European companies are strong in these areas.

According to WTO's data, the trade surplus of Europe's service industry to China last year was only 1 billion 700 million dollars.

Chinese government officials point out that European companies have invested heavily in China.

According to the Ministry of Commerce, the sales volume of EU companies in China in 2006 amounted to US $206 billion 600 million and exports amounted to US $43 billion 200 million.

Chinese scholars say that these data should be considered as a consideration when considering the balance of interests between the two economies.

Analysts say that the existing EU investment in China and the potential of the Chinese market to promote the rapid growth of European companies' sales have made China face the pressure to face the pressure of opening up its domestic market.

When President Sarkozy visited Beijing on Monday, NicolasSarkozy announced that China had purchased $about 30000000000 worth of aircraft, pharmaceuticals, nuclear power and telecommunications equipment, mainly made in France.

Sarkozy did not strongly criticised China's human rights issue.

Arthur, Hingis, chairman of BayerScheringPharmaAG's BayerHealthCare, said in an interview with reporters that luckily China, together with Brazil and Russia, made up for the decline of the mature western market.

Hingis said Bayer's kidney cancer treatment drug Nexavar is better in China than the UK, though it costs about $20 thousand a year.

The World Bank estimates that there are 56 million middle class in China, and the number is rising.

China's wealth is growing, which means that China no longer needs to grab foreign investment.

6 years ago, when China joined the WTO, it promised to break the barriers to foreign trade and investment. Now many companies want to know how to make China make concession again and set off a new wave of market opening.

JoergWuttke, President of the EuropeanUnionChamberofCommerceinChina, said in an interview with reporters that people are tired and disappointed because China has not fully complied with the commitments made during the WTO accession.

"China believes that it has already complied with its commitments, which is also worrying Mandelson and us.

The investment environment has not improved, especially in the service sector.

Because of the different interests of the 27 member states of the European Union, there is still strong doubt about whether Mandelson or other EU leaders can stick to their tough attitude towards China.

In 2005, the EU considered anti-dumping duties on Chinese textiles and added footwear products a year later, when EU members agreed and opposed the same strength.

Countries such as Italy and Poland, which play an important role in the economy of footwear and textile industries, support the implementation of protective tariffs.

The consumption driven rich economies oppose taxation, pointing out that this will reduce the supply of low cost goods.

At present, the European Union is deciding whether to impose punitive tariffs on low-cost Chinese steel.

This has once again led to the division of steel manufacturing countries such as Germany and China's iron and steel consuming countries such as Britain and Denmark.