Posts by ValbonaZeneli:
- In spite of the advantages it should bring, #TTIP has already met with opposition from global stakeholders.
- The Transatlantic order could integrate rising powers into the global system, but must be strengthened first.
- #TTIP could boost development, strengthen the West’s natural partnerships and create a global level playing field.
China’s Interest in Central and Eastern Europe
June 13th, 2014By Valbona Zeneli.
The Middle Kingdom sets its eyes on Europe’s eastern half, to get a beachhead into Western Europe.
China is a magnet for European companies. With a trade volume of almost $600 billion, and a trade deficit with China at about $150 billion, the European Union is China’s largest trading partner.
The EU and China are seeking to bring trade to $1 trillion by the end of this decade, in line with the EU-China 2020 Strategic Agenda for Cooperation. However, the benefits of this trade relationship are unevenly distributed in Europe, with more advantages for countries in the continent’s North.
China is seen as using Europe as a hedge against the United States. That is one reason why China already stepped up purchases of eurozone sovereign bonds. China has also invested across strategic industries in Europe and infused a lot of capital into property markets.
What about China and the countries of Central and Eastern Europe? While China’s interests in the region are manifold, Chinese companies so far have only invested in the low billions there.
To bolster financial cooperation, a credit line stretching up to €10 billion was one of the proposals put forward at last year’sChina-CEE leaders’ summit. It also allowed for the establishment of branches of Chinese financial institutions in Eastern Europe.
China searches for new markets
China looks at the CEE countries primarily as a market for its own strategic industries, exports, and as a large window into Western European markets.
As Beijing continued to look for new markets, it made a pledge to double trade, although increasing imports of Central and Eastern European products to China seems relatively challenging.
Central and Eastern Europe-made products cannot compete on price with the lower-cost products made in China, nor do the region’s companies innovate enough to compete on quality in the Chinese market.
China also offered to satisfy the urgent needs for infrastructure in CEE (such as in high-speed and freight railways, nuclear and other forms of power, roads, ports and telecommunications).
Through investments in central Europe’s infrastructure, Beijing wants to accelerate the creation of a network of ports, logistics centers and railways to distribute Chinese products and bolster East-West trade.
Finding more energy abroad
Another important pillar of China’s expansion policy concerns securing its present and future demand for commodities, mainly by investing in countries rich in natural resources.
Especially attractive is the Balkan energy sector. Major western utility companies are unwilling to make risky investments, which gives China some options. Countries such as Albania, Montenegro and Bosnia-Herzegovina are attractive for their hydropower capacities. Macedonia, Serbia and Croatia attract investment for their wind energy potentials.
More generally, China is keen to proceed with projects in nuclear, wind power, telecommunications and high-speed railway sectors. It has agreed to build a high-speed rail line linking Hungary to Serbia and pledged to help Romania connect with Hungary.
Where to from here?
For Beijing, trade relations with Southeast Europe mainly focus on exchanges with the largest and newest EU countries. The still transitional economies of the Southeast Europe allow China to circumvent some of the EU’s anti-dumping regulations and export products directly to a market of 800 million people thanks to FTAs with EU.
In November 2013, during his meetings in Bucharest with 16 prime ministers from the Central and Eastern European countries, Chinese Premier Li Keqiang called for wide-ranging, multi-tier cooperation aimed at doubling trade and investment in five years.
However, China is not exactly an easy partner for the EU. Controversial issues include intellectual property rights, price distortions due to subsidize dumping, unequal conditions for market access, as well as discrimination against EU companies in Chinese government tenders.
And within Europe, although China and the EU signed a strategic partnership in 2004, there is a lack of common understanding in Europe about strategic policies towards China.
Fusing Chinese industry and European technology
One of the most significant strategic objectives of China’s investment in Europe is to engage more closely with the continent’s research and development networks.
To some extent, China continues to depend on technology from Europe and the United States. China is not yet an innovation powerhouse, although its spending on R&D is rising very rapidly.
China still spends less than half as much as the EU as a whole and only one-third of what the United States spends on R&D. Chinese companies are good at incremental innovation, but they lag behind advanced countries when it comes to disruptive innovation.
Less than 6% of Chinese patents are protected by global patents, compared to 49% of U.S. patents. Fifty percent of total exports and more than 90% of China’s high-tech exports are produced by foreign companies operating there.
For Europe, China represents a huge economic opportunity. Chinese labor and capital working alongside European rules and technology — carefully managed — could create significant opportunities for both economies going forward.
Editor’s note: This article reflects the views of the author and is not necessarily the official policy of the U.S. or German governments.
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TTIP’s Effects on the Global Economy
March 12th, 2014By Valbona Zeneli.
In uncertain economic times, TTIP means stronger ties within the West — and with the rest.
Credit: Harvepino – Shutterstock.com
Takeaways
The proposed deal to reach an agreement — by the end of 2014 — on a transatlantic trade and investment partnership (TTIP), serving the world’s first and second biggest markets – the European Union and United States — is intended to deepen transatlantic relationship, assert global trade policy leadership and advance a rules-based system for the global governance.
In practical terms the deal is expected to boost combined GDP by almost 1% in the short term, add 2 million extra jobs and offer more choices and lower prices for consumers.
In spite of the advantages it should bring, the proposed Transatlantic Trade and Investment Pact (TTIP) has already met with opposition from global stakeholders, who point to several obstacles to the success of the agreement.
Effects on other trade deals?
One of the main points of criticism is that such a trade deal would put third countries — such as Canada, Mexico and Turkey, that already have bilateral agreement either with the U.S. or EU — at a disadvantage. Will it diminish the value of their agreements?
Another criticism is that the eventual deal would jeopardize the functioning of the WTO. Could it hinder successful conclusion of a multilateral agreement (i.e. the completion of the Doha Round)?
Many others cite the contentious history of the EU-U.S. over trade policies governing global agriculture, intellectual property and information technology.
Statistically speaking, modern empirical research suggests that the conclusion of important bilateral agreements actually increases the incentives of third parties to achieve further liberalization steps at a multilateral level.
This is also good for the rest of the world, given the integrated supply chains in today’s global market. Everyone can benefit from the agreement.
The need for integration
Policymakers have drawn lessons from the most recent economic downturn. These lessons reflect a new development paradigm and reveal that international economic cooperation and integration have become imperative for addressing the nature of new global challenges.
This shift towards broader agreements responds better to today’s economic realities, in which international trade and investment are increasingly interconnected. The main objective is the consolidation and harmonization of investment rules worldwide, creating a level playing field for competition.
Other agreements currently being negotiated are the Trans-Pacific Partnership Agreement (TPP) – linking North and South America with the dynamic markets across the Asia-Pacific region – as well as the EU-Japan and EU-Canada agreements, which are moving quickly toward finalization.
Does a regional agreement like the one between the U.S. and EU reduce the likelihood of successful reforms of the multilateral trade regime under WTO?
Building block or obstacle?
It has been demonstrated that regional integration efforts are neither a building block nor a stumbling block to the progress of multilateral liberalization. On the one hand, they reduce incentives for participating countries to make concessions at the multilateral level.
On the other hand, they increase the benefits from successful multilateral negotiations for initially uninvolved countries. In particular, emerging economies could be persuaded to make concessions.
Regarding the objection that the TTIP agreement would diminish the value of bilateral agreements with third countries, scholars suggest for countries already linked by agreement to either the EU or the U.S. have great incentives to form a deeper partnership with the other partner with whom they do not yet have an agreement.
This would allow a U.S.-EU trade deal to eventually serve as a platform for the inclusion of other regions with which both parties have negotiations or agreements. This is the heart of the “building-block” argument.
A deeper bilateral agreement between the U.S. and the EU poses no existential threat to the multilateral trading system. Instead, it helps this system to develop further in a more structured form.
A historic step in the making
The transatlantic economic order, in the rules-based system, is unique. In the last decades, it has boosted global economic growth for a variety of stakeholders, including China. This order has the potential to integrate the rising powers into this system, but strengthening the latter remains a prerequisite.
The TTIP is a timely political, economic and cultural partnership that – if negotiated well – should boost world economic development, strengthen the natural partnership of the West and create an international level playing field for fair competition.
It may also strengthen the bonds within European Union countries. It is a historic step in the making, which could tremendously benefit both sides of the Atlantic.
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