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Larger EU Provides Vast Market to Chinese Companies

The enlargement of the European Union on May 1, 2004 will offer Chinese companies a bigger unified market and better investment destinations, despite concerns that the EU's technical standard for imports and anti-dumping measures will be applied wider, according to a senior trade official.

Chinese enterprises are being urged to increase their investment in these 10 countries, said Sun Yongfu, director of the Department of European Affairs under the Ministry of Commerce.

"The 10 new members of the EU, which have relatively low investment costs, will be good footholds and gateways for Chinese companies to enter the EU market," said Sun.

Financially-strong local companies are investing more in establishing overseas production facilities, but less are located in EU members because of higher costs.

The 10 new EU members are Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia.

The enlargement is the most ambitious one for the EU, which has already experienced four enlargements and grew from six to the current 15 members.

Many countries, conscious of this impact, conducted an evaluation of the upcoming enlargement.

Sun believed the larger EU will mean a bigger market with more stable and transparent trade and economic policies.

Upon the accession, the 10 members will become part of the EU single market and consequently subject to the EU's common commercial policy.

The enlargement will create a market with a gross domestic product of 10 trillion euros (US$12.55 trillion) and 460 million consumers.

Its trade outside EU totals US$915 billion, accounting 20 percent of global trade.

"The tariff rates of the 10 members will also be lowered in accordance with the rates agreed by China and EU in the World Trade Organization documents," Sun said.

EU officials also said earlier that the enlargement will provide a larger market value for Chinese products and welcomed Chinese investment.

But the approach of the EU to automatically extend all existing trade defence measures to new members raises a number of concerns, analysts said.

The EU has exclusive competence in the area of trade defence and the new member states will apply the trade defence measures upon accession.

Li Gang, an expert on European Economy from the Chinese Academy of International Trade and Economic Cooperation, said the main concern is that the existing measures have been determined on the basis of an investigation which was made with respect to the current 15 members while the measures would, after accession, automatically extend to 10 new members which were not covered by the original investigation.

Although the European Commission has pointed out that third-country exporters will be entitled to request reviews of existing measures, this solution might not be satisfactory for exporters in a number of cases, Li said.

"A Chinese exporter who is subject to an anti-dumping duty, wishing to make a request for an enlargement-specific interim review, may be faced with insurmountable difficulties."

The exporter would have to prove that the circumstances have substantially changed due to enlargement, Li said.

Nonetheless, it is advisable for traders to begin examining the situation concerning their products in an enlarged union, Li said.

(China Daily February 6, 2004)

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