SHARE
COPY LINK

CHINA

Merkel pledges to avert EU-China trade war

German Chancellor Angela Merkel pledged late Sunday to take steps to avoid a brewing trade war between China and the EU during a first visit by China's new premier to Germany, with both leaders calling for dialogue.

Merkel pledges to avert EU-China trade war
Photo: DPA

Germany will push in the next six months for discussions on resolving the disputes between Brussels and Beijing over Chinese telecom products and solar panels to avoid it ending in mutual tariffs, Merkel said.

Both she and Premier Li Keqiang, who is on his first foreign tour since taking office in March, told a joint press conference that they rejected trade protectionism which hurt both sides.

Under pressure from German industry, Merkel said Germany would do its utmost to resolve the issues by pushing for talks to avoid “lapsing into a kind of dispute which finally only ends in mutual tariffs”.

“I will, as head of the government, advocate that we, at the European level, as quickly as possible have intensive discussions with the Chinese side on the questions at issue,” Merkel added.

Germany is by far China’s biggest European trading partner. While German motor vehicles and auto parts, machinery and electrical goods find a vast export market in the world’s second-largest economy, China needs technology from Germany.

German exports to China amounted to €66.6 billion ($86 billion) last year, according to official German data.

But as both the EU and China suffer the knock-on effects of a sharp economic slowdown, the slew of looming trade disputes – over telecoms, solar panels and steel tubes – has turned up the heat.

Li, whose tour has also taken in Switzerland, India and Pakistan, said China “resolutely” rejected the European Union’s plans to probe the country’s telecom products and impose taxes on solar panels.

He said the move would not only threaten jobs in China and hit the branches concerned, but also affect the interests of European companies, consumers and industry.

“To this effect, this measure is a measure that doesn’t serve the particular interests and also damages others,” Li told reporters through an interpreter.

“Therefore we hope that through joint efforts and through dialogue and consultations, the trade disputes between China and the EU can be settled acceptably,” he added.

And he said that the EU decisions sent the “wrong signal” that trade protectionism had made a “comeback”.

Germany is the only stop among the EU’s 27 member states for Li on the trip, in a sign that Beijing wants to continue their special relationship, analysts say.

“From the German side, it’s all about trade. Germany sees China essentially as a large export market on which it’s increasingly dependent,” Germany expert Hans Kundnani, of the European Council on Foreign Relations, told news agency AFP.

Merkel made two trips to Beijing within just seven months last year and said Sunday the two sides wanted to further bolster their already “close” relations, citing four areas – industry, IT, urbanisation and agriculture.

But for China, Germany is not only economically important in providing much-needed technology but also plays a strategic part in helping to combat Beijing’s fear of the US and Europe teaming up against it, Kundnani said.

Li said his visit to Germany was also about visiting the EU. “We want through the intensification of cooperation with Germany, to also advance the relations and cooperation with the EU,” he said.

EU exports to China totalled $212 billion, with imports of $334 billion in 2012.

AFP/mry

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

READ ALSO:

With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

SHOW COMMENTS