extracted from: http://sg.biz.yahoo.com/071128/1/4d12q.htmlChina and Europe confronted each other over their long-running trade dispute here Wednesday, with the EU calling for a level playing field and Chinese Premier Wen Jiabao insisting on gradual reform.
"The EU exports less to China than to Switzerland, a country of seven million people," European Commission President Jose Manuel Barroso told business forum on the sidelines of annual summit between the two sides.
"Our ultimate goal is to create a level playing field for both sides."
EU Trade Commissioner Peter Mandelson spoke out at the same forum about China's trade surplus, which has put the focus on the Chinese currency, the yuan, with critics arguing it is being kept artificially weak.
"Our trading relationship with China started as we know in a balanced way," Mandelson said, with Wen in the audience.
"Now it is less balanced. Indeed in my time in China these last five days, it has grown by over two billion euro," he said, referring to Beijing's trade surplus.
In closed-door talks with Barroso earlier Wednesday, Chinese President Hu Jintao pledged to do more to cut the surplus, according to an EU official.
"I don't favour a sizable trade surplus with the EU. We are ready to work with you to reduce our surplus," Hu said, according to the official, who asked not to be named.
Meanwhile, Wen told the audience of European and Chinese business chiefs that China would continue with its policy of gradual reform of the yuan, also known as the renminbi or RMB.
"China will continue to reform the RMB exchange rate regime in a gradual, proactive and manageable manner," he said, while insisting the Chinese currency was not the only reason for their trade dispute.
"The exchange rate is a cause to some extent, but not the sole decisive factor behind the trade deficit."
The weakening US dollar was the main reason the euro was strengthening, Wen later told journalists, adding that Brussels would be better off bringing up the issue with Washington.
"I propose that the best way to address this problem is to take it up with the American financial authorities," Wen said as Barroso looked on.
However, during talks both sides agreed to set up a high level "mechanism" to address trade issues, including the trade deficit, market access in China and Beijing's intellectual property rights regime, Barroso said.
The joint mechanism would hold its first meeting in March next year, he added.
While the Chinese currency has risen against the US dollar for more than two years, it has fallen against the euro, making Chinese products cheaper and more competitive in Europe.
"They have to consider that not all adjustments should be focusing on the relationship between the dollar and the yuan," EU Economic Affairs Commissioner Joaquin Almunia told reporters in Beijing.
"They must think about the evolution of the exchange rate toward the euro," he said.
Amid the dispute, European representatives said they wanted to avoid protectionist measures.
"We... need to identify a solution to solve this question, and I hope that it is a cooperative one," Serge Abou, the EU's ambassador to China, said in an opinion piece in the China Daily newspaper published Wednesday.
"Protectionism is not a winning option. So let us unite our efforts to resist protectionist trends."
The EU, China's largest export market, ran a trade deficit of 128 billion euros (175 billion dollars) with China last year -- which is likely to balloon to 170 billion euros in 2007, according to EU statistics.
The European delegation headed by Barroso also met with Li Keqiang, a member of the ruling Communist Party's nine-member Politburo Standing Committee.
"Since 1975, this relationship has come a long way," said Li, widely considered a rising political star among the next generation of leaders slated to assume power in five years.
"I particularly want to mention our fast growing business ties," Li told the European visitors.Labels: amanda (07A102), international relations, trade with the EU
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