October 5, 2010
By JAMES KANTER
BRUSSELS — The European Union’s trade chief said Tuesday the bloc could limit the ability of Chinese companies to bid for public works projects unless European companies get the same access to China’s fast-growing economy.
The trade commissioner, Karel de Gucht, speaking as the Chinese prime minister, Wen Jiabao, was meeting with E.U. leaders here, repeated the European position that the Chinese currency was undervalued, which he said was a prime concern for European businesses.
But he said he was not planning any official initiative to penalize Beijing because the currency, the renminbi, was likely to rise in value on its own over time.
Instead, Mr. de Gucht said one of the best ways to help European industry take advantage of the booming Chinese economy was to ensure European companies could participate in public procurement contracts.
Such rules would give Europe “a tool whereby we can impose reciprocity,” Mr. de Gucht said.
“Imagine a Chinese company that participates in a bid, and on the other hand the same sector, or subsector, of public procurement is not open in China, then we could make an intervention,” he said.
Mr. de Gucht said he could make the suggestion for the mechanism as soon as the end of the month. He would then aim to make a fuller proposal in coming months, or next year.
Such a mechanism would also need approval by governments and the European Parliament — a process that can take several months — before going into force.
Mr. de Gucht said the mechanism was necessary because European companies were increasingly frustrated by roadblocks to investment in China at a time when Chinese investors are making inroads into Europe.
In Poland last year, a Chinese consortium won the contract to construct two sections of a highway from Lodz to Warsaw, the first time that a non-Polish or non-European company had been awarded a contract that would be financed partly by the European Union.
That case, and in another in Germany, had aroused anger because Chinese investors made bids that were far lower than competitors’ bids, Mr. de Gucht said.
Some countries had said that “this is completely unacceptable” and that the “European Union should react,” he said. “The only way to react to that is that we say, ‘Look, this cannot be done by a country, or a company from country where there is no reciprocity in this respect.”’
Speaking about the Chinese currency, Mr. de Gucht cast some doubt on whether other countries would be able to require China to change its valuation. He suggested that factors within China, like higher inflation, were likely to be more effective in bringing about an appreciation of the renminbi, also known as the yuan.
“Whether we are in position to force them to appreciate the yuan, I’m not sure,” he said. “We, as a commission, do not plan to take such an initiative.”
He spoke as euro-area policy makers pressed China at an Asia-Europe meeting in Brussels for a faster appreciation of the currency to help rebalance the world economy.
Jean-Claude Juncker, chairman of the group of finance ministers from the 16 countries that use the euro, said that message had come as little surprise to the Chinese, but that the “Chinese authorities do not share our view.”
Mr. de Gucht also said he was concerned about E.U. countries gaining greater access to rare earth metals, which are mined in the largest quantities in the world in China and are important for automotive, electronics and clean-energy industries.
China has maintained that opening up additional rare earth mines risks damaging the environment. But Mr. de Gucht said that his office was continuing to examine evidence of trade distortions.
“We will look into it,” said Mr. de Gucht, who added that if expanding market access to rare earth metals was “really an environmental problem” then Europe might be able to help ease those concerns.
Mr. de Gucht also has led the E.U. response to a long-running battle with the United States over subsidies for the commercial aircraft sector. The World Trade Organization this year criticized both the way that European governments supported Airbus and the way that the U.S. government and individual states supported Boeing.
Since those preliminary rulings, Mr. de Gucht said it was more evident than ever that authorities on both sides of the Atlantic were guilty of supporting their aircraft industries, and he urged U.S. legislators not to use the earlier ruling against Europe as a pretext for impeding Airbus’s parent company, European Aeronautic Defense & Space, in its bidding on a U.S. Air Force tanker project.
“It would be a mistake to use it in the tanker deal,” he said, referring to the findings against Airbus. It was “a fact of life” that producing large aircraft required help from governments, he said.
Mr. de Gucht also urged the U.S. trade representative, Ron Kirk, to respond to his invitations over recent months to start negotiations on new financing rules for the aerospace industry.
“It’s up to the United States to give an answer,” he said.
The U.S. Trade Representative’s office in Washington was not immediately available for comment.
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