CHINESE NON TARIFF BARRIERS: OBSTACLES TO FREE TRADE
Submitted by christian on Tue, 08/16/2016 - 14:53
- European exporters and investors are facing an increasing number of unjustifiable non-tariff barriers in the form of product certification, labelling standards, import approval requirements and customs clearance delays. Europe uses industrial standards to facilitate trade, not to create obstacles. Many of the Chinese standards such as the CCC standard require certification by the Chinese authorities before a product can be put on the Chinese market. Important information has to be submitted and the factory has often to be inspected at the expense of the exporter. This is a lengthy and costly procedure. Many of EU exporters, in particular, SMEs are discouraged to export in such a difficult environment. The delays also provide counterfeiters with a fantastic period of opportunity to put the fakes on the Chinese market even before the EU real products can be sold.
- The application of laws is often not uniform and regional variations in customs procedures have a negative impact on trade.
- Unreasonable sanitary and health requirements can also create barriers that hamper exports to China, not least because Chinese national standards often differ significantly from international standards. This results in high compliance costs and extended delays for business which impact on their ability to sell on the China market, affecting in particular EU small and medium enterprises.
- In many manufacturing and services sectors European investors are still prevented from setting up wholly owned foreign enterprises and are required to establish joint ventures with Chinese partners. In some situations this can mean EU companies are forced to share proprietary technology or even just valuable experience with Chinese companies before they are even allowed to compete in the Chinese economy. In the manufacturing sector, China continues to maintain investment restrictions on some key industries for Europe such as automobiles, petrochemicals or steel. European car manufacturers are present in China. However, they are constrained to operate in the form of joint ventures with 50% of capital to their Chinese partners. The number of joint ventures is also limited (2 for passenger cars + 2 for commercial vehicles). The Chinese partners of European car manufacturers benefit from the profits and the technology of European companies and will emerge soon as global competitors.
- In the telecoms and financial services sector, EU firms have been unable to expand significantly because of high capital requirements and complex approval procedures. Potential EU investors also do not have the free choice of their joint-venture partner, despite China's commitments to the contrary. As a result, major EU operators have been kept out of one of the fastest growing telecom market globally. China maintains a number of regulatory barriers which make investment in the banking sector very difficult. Most notably, China maintains ownership caps of 20 percent (per shareholder) and 25 percent (for all foreign shareholders combined) for foreign shareholdings in a Chinese bank. While foreign banks are allowed to open branches, regulatory treatment remains discriminatory. Branches of foreign banks are for example subject to higher capital norms than Chinese banks, which moreover are coupled with the number of their offices. Costs for establishing bank branches in China are therefore very high and foreign banks market share in China remains marginal (less than 2%).
- EU has a real potential to export high quality and high value added agricultural products to China. However, many of China's markets remain closed due to China's important non tariff barriers affecting this sector.
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