New EU scheme to hurt China trade

China's trade with the EU will be impacted under the EU's new scheme for Generalized System of Preferences (GSP) and the country will negotiate for further trade liberalization under the WTO system to minimize its loss from the increasing EU protectionism, officials with the Ministry of Commerce (MOFCOM) and trade experts said yesterday.

"China is currently a beneficiary of the GSP scheme. Under the new GSP scheme, a larger number of products from China will not be able to enjoy preferential access to the EU markets. China may also be taken off the list of beneficiaries in the future," Huang Hongyong, an official at the ministry's Department of European Affairs, told the Global Times yesterday.

"The GSP is a unilateral arrangement. We'll campaign to raise the threshold of the GSP scheme to allow China to enjoy more trade with the EU," he said.

The European Parliament approved draft legislation for the new scheme for developing countries last week.

The updated GSP will cut the number of countries that enjoy favorable access to the EU from 176 to around 75. Countries whose per-capita incomes have exceeded $4,000 for four years will stop enjoying tariff preferences.

It will also reduce the total value of imports that qualify for EU preferences from 60 billion euros ($75.9 billion) in 2009 to about 37.7 billion euros in 2014.

The GSP offers lower tariffs or completely duty-free access for imports into the EU market. China's GPD per capita reached 29,992 yuan ($4,430 equivalent) in 2010.

"China is still an export-oriented economy. The new GSP scheme will have a big negative impact on China's trade with the EU," said Zhao Yongsheng, vice chairman of Paris-based l'Association des Juristes et Economistes Chinois en France (China-France Association of Lawyers and Economists).

Chinese exporters are already feeling the pinch as a result of the EU's tightening trade policy. Ma Lifang, a sales manager with Ningbo Raffini Import & Export Co, which exports over 30 percent of its products to the EU, said the orders the firm has received from the EU are shrinking this year, and an order worth $100,000 is now considered large.

"The EU's new move sends a signal that its trade policies are getting increasingly conservative as it struggles with the debt crisis and its trade protectionism is bound to rise," said Tu Xinquan, associate director of the China Institute of WTO Studies.

"The GSP revocation makes China even more dependent on trade liberalization in the WTO system - it is clear that China has most to benefit from the WTO and China should take the lead," said Hosuk Lee-Makiyama, co-director of the Brussels-based European Centre for International Political Economy.