Sunday, May 22, 2011

Europe and China - trade deficits widen

One of the most contentious issue in international trade is the unabated growth in trade imbalances between China and its trading partners. Most major economies, except, a handful like Germany, have large and growing trade deficits with China. The graphic below shows that exports from most European countries to China are rising faster than imports from China.

If this trend continues, protectionism is not far behind. The US has repeatedly accused China of unfair trade practices, artificial currency manipulation being the most oft-repeated.

Last week, the European Commission imposed its first ever antisubsidy tariffs against imports from China accusing China of unfair trade practices. It accused the country of "significantly subsidizing its coated fine-paper industry by giving cheap loans, allocating land below market value and granting various tax incentives", and imposed duties of up to 12 percent on imports of high-quality paper used for magazines and brochures.

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