October 24, 2006	Tuesday	Ramazan 30, 1427

PARIS, Oct 23: The European Union warned China on Monday that it must redouble market reform efforts and its commitment to economic openness or face a protectionist backlash.

"We will only be able to maintain the case for openness in Europe if China shares reciprocal openness and readiness to play by the rules of trade," EU external affairs commissioner Benita Ferrero-Waldner and trade commissioner Peter Mandelson wrote in The International Herald Tribune.

"If not, we could see in Europe the growing defensiveness and protectionism that is becoming evident in some quarters in the United States."

The EU's executive arm, the European Commission, is on Tuesday to set out its new political and trade policy for China, which is to call on Beijing to fully implement its commitments to the World Trade Organisation if it wants to enjoy balanced trade relations with its number one commercial partner.

Ferrero-Waldner and Mandelson argued that Europe should continue to offer open and fair access to Chinese exports and adjust to the competitive challenge.

But they called on China to "reinforce these efforts by strengthening its commitment to economic openness and market reform.

"It should improve legal protection for foreign companies and reject anticompetitive trading practices and policies," they wrote.

The commissioners acknowledged that Europe can't call for free trade without practicing it.

"When we use antidumping measures, they must only be directed against unfair trade, not used to deflect fair competition," they wrote.

They said the Commission's new China initiative would signal the responsibilities of both China and Europe, and its first goals would be striking a new comprehensive partnership and cooperation agreement, and the updating of trade and investment agreements.

The 25-member European Union is China's leading commercial partner, accounting for 19 per cent of Chinese foreign trade. China today is the primary source of imports on the EU market.

But with a middle class increasingly attracted to European products, China is also a key market for the EU, which saw its exports to the Chinese market soar 69 per cent between 2000 and 2005, a much more rapid expansion than with the rest of the world.

Mandelson travels to China early next month, when he is expected to deliver the openness message contained in the new policy document that will be presented Tuesday in Strasbourg.

"For the relationship to be politically and economically sustainable, China needs to demonstrate its commitment to open markets, fair competition and responsible leadership," the document will say, according to a European source.

But it will also warn that in Europe "there is a growing perception that incomplete implementation of WTO obligations and new barriers to market access are preventing a genuinely reciprocal trading relationship between Europe and China."

Expanding access to the Chinese market for European goods and investment will be a key objective in negotiations for a new EU-Chinese cooperation accord. The EU is looking in particular for better access -- even beyond Beijing's WTO commitments -- to the Chinese public sector.

Another area of keen concern to the European Union is securing greater protection for industrial property rights in China, a leading source of counterfeit goods. The EU also wants China to halt subsidies in the form of grants to businesses and to reform its banking system to eliminate soft loans, offered at low rates of interest, and other forms of non-profit credit.

Europe in addition is urging China to allow market forces to determine the outcome of trade in raw materials and energy products such as coal and coke.

—AFP