EU on US' China policy

[Eubulides <paraconsistent@xxxxxxxxxxx>]

Europe rejects hardline US policy on China's currency

Jonathan Watts in Beijing
Saturday November 1, 2003
The Guardian

The European Union distanced itself from the United States' hardline
policy on Chinese exports yesterday when its top trade official rejected
claims that the weak Chinese currency was largely to blame for a growing
deficit with the Asian nation.

Pascal Lamy, the EU trade commissioner, said he would not push Beijing to
adjust the renminbi because a sudden move might destabilise China's shaky
financial system or lead to an explosion in unemployment.

"We don't believe the undervaluation of renminbi is the main cause of
China's competitiveness," Mr Lamy told reporters. "We have the same sort
of stance on the yuan [the alternative name for the renminbi] and euro as
we have on the trade deficit, and the flavour of that is quite different
from the Americans."

However, he supported proposals - floated in China - for the renminbi to
be pegged to a basket of currencies, including the euro and the Japanese
yen, and not just the dollar.

Mr Lamy was speaking in Beijing at the end of an EU-China summit on
enhancing economic ties. Among the agreements reached was a deal to
increase the number of Chinese tourists to Europe and a tentative
acceptance of a â200m (Â137m) investment by Beijing in Europe's Galileo
satellite global positioning system - which is opposed by Washington.

The question of the rising trade deficit was also high on the agenda.
China's surplus with the 15-nation EU rose 15% to â47bn last year - a
cause for concern for European business groups which have urged China to
adopt a more flexible currency policy, open up its markets and strictly
enforce intellectual property rights.

Mr Lamy said he would press Beijing to crack down on piracy as well as
honouring other commitments it made to the World Trade Organisation.
However, even though European exporters have been punished more than their
US counterparts by recent currency movements, he said it was too early to
worry about the trade deficit."We, at this stage, do not consider it to be
a short term problem, though if it goes on rising it might become a
problem."

His comments struck a more conciliatory tone that those of senior US
officials recently visiting Beijing. In September, US treasury secretary
John Snow prompted howls of protest by raising the currency issue with his
hosts.

US manufacturers say the renminbi is undervalued by as much as 40%, giving
Chinese goods an unfair advantage. With jobless rates rising in the US,
the issue has become a hot topic in the early stages of presidential
primaries. To ease tensions, Chinese prime minister Wen Jiabao announced a
series of government shopping trips to the US to buy more aircraft,
telecommunications devices and chemical products.

So far, European negotiators have shown more sang-froid in focusing on the
mutual gains to be had from China's economic growth.

According to Mr Lamy, the value of trade between the two is forecast to
hit $115bn (Â68bn) this year, a rise of 25%.