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Asia

China: 'An economic force to be reckoned with'

As yet another trade row between China and the European Union escalates, China expert Thomas König takes a look at how the latest disputes have been affecting relations between two of the world's largest economies.

According to media reports, the European Union recently asked the World Trade Organization to rule in a dispute over Chinese anti-dumping duties imposed on steel pipes imported from EU countries. In a press release the EU said that it made the request after unsuccessful consultations in July.

The two economies had previously been embroiled in a series of trade tiffs. A dispute over China's solar panels was only recently defused after Chinese companies agreed to set minimum prices. In a DW interview, Thomas König from the European Council on Foreign Relations says the fact that EU exports of steel tubes to China are relatively small indicates that China wants to test how coherent and decisive European responses to tariffs will be.

DW: What might be the reason behind Chinese duties imposed on imports of steel tubes? Could this be retaliation?

Thomas König: I would caution against the use of confrontational language such as "retaliation" and I don't think that a correlation between EU tariffs and the steel tube duties is a given. However, China's actions are most likely yet another attempt to "play in the big leagues" and to be accepted as an economic force to be reckoned with. The fact that EU exports of steel tubes to China are relatively small simply shows that China is testing the waters to see how far it can go and how coherent and decisive European responses will be.

Could the ongoing path of disputes over a range of different products eventually lead to a trade war between the EU and China?

Yes, but only if both parties continue to play this game of tit-for-tat, without considering the long-term consequences. The EU's closer scrutiny of trade practices with China is a commendable step in the right direction. China's attempt to test the seriousness of the EU is also understandable.

However, this issue can quickly get out of hand if both sides start to overreact. Europe, driven by the general gold rush in China, used to unquestioningly deal with China, while China unquestioningly welcomed this involvement.

It seems increasingly difficult for the EU Trade Commissioner Karel de Gucht to rally support from the 28 member states to impose trade penalties on Chinese products. Are the Europeans becoming increasingly unwilling to step up against the growing Chinese influence?

China continues to be the number one market for many European investors and companies; big revenues for some have only been aided by the relatively undefined "terms of engagement" with China. Fears of angering Beijing are very real, but if European companies want to continue to be accountable global players, it is necessary to close the loopholes and make the progression into an adult trade relationship.

Current economic engagement with China is simply not sustainable, while national interests often appear to clash with the "European agenda." This is yet another reason why it is so crucial to handle this relationship with extreme care.

How are the Chinese finding ways to influence single European states to oppose the tariffs proposed by the EU trade Commission?

China already is an undeniable presence in Europe and thus far, China has often directly circumvented the European Commission for the sake of direct bilateral engagement at the expense of wider European interests. The euro crisis has made Chinese capital flows even more attractive to struggling member states and helped to undermine the European system.

China is perceived as relatively hassle-free when it comes to trade and investments. The European Commission, on the other hand, is bureaucratic and unwieldy and does not create immediate results. This is yet another reason why the Commission needs to emphasize that member states can contribute to shaping long-term engagement with China, rather than blindly focusing on instant gratification.

Could the EU decision to ask the World Trade Organization (WTO) to rule in the dispute over anti-Chinese dumping duties backfire?

China's admission to the WTO was an important signal to the rest of the world, indicating that the Chinese are in the big leagues now.

The giant logo of German vehicle maker Daimler's Mercedes-Benz sits on the top of its head office building in Beijing on October 11, 2010. (Photo: GOU YIGE/AFP/Getty Images)

China continues to be the number-one market for many European investors and companies, says König

As a nation that is so much concerned with economic growth, China's global economic reputation is of utmost importance to the leadership. This is why it is likely that China will acquiesce to any WTO rulings. But Chinese netizens called the referral to the WTO a sign of weakness from the EU, citing general inability to take care of its own affairs, so it could backfire in that regard.

From a European perspective, however, support from the WTO just further legitimizes their claims. But it will take time to gauge the long-term effects of the referral to the WTO. It might just as well be perceived as Europe fearlessly exploring all possible avenues once it sees its own interests in danger.

Thomas König is the China program coordinator at the European Council on Foreign Relations.

The interview was conducted by Gabriel Domínguez