European Union: Issues and Policies - Essay Example

Since 1970s, China has developed policies and embraced reforms that have aided in boosting domestic economy to record high growth rates compared to any other country in the recent past (Foster, 2012). Chinese export-oriented policies have steered this country to penetrate into major markets, both in developed and underdeveloped nations over the last few decades (Amiti & Freund 2010, 1). Of greater concern, EU has recorded an ever-increasing deficit in its trade with China all along, since establishment of trade relations in 1970s.

According to Amiti & Freund (2010, 1) this deficit has increased tremendously over the last one decade. In this regard, Chinese economic rise can be perceived as a major challenge and a threat to economic competitiveness of EU in the global arena, especially after EU has suffered greatly from its mistakes of its member countries such as Greece and Spain, delaying its overall development (Watt 2006, 540). This calls for specific policy responses among the EU members. This policy paper is addressed to the European Commission Board and it examines the extent to which China has threatened economic competitiveness of EU in the global market.

Global Trade in Goods As mentioned earlier, EU is the largest exporter of goods in the global market. . Most of China’s growth in FDIs and exports is credited to foreign firms, which are the largest exporters in the country (Dullien, 2005, 128). Figure 1: 2010 Export Statistics in the Global Market Source: Grinberg et al (2011 p. 4) Table 1: 2010 Export and Import Statistics in the Global Market Source: Grinberg et al (2011, 6) Table 2: Global Trend in imports and Exports Source: Grinberg et al (2011, 7) As , Grinberg et al (2011, 7) explains, there has been non-proportionate growth in rates of exports and imports among the major players in the international trade over the last two decades, leading to reallocation of market shares from developed to the emerging economies such as China, India, Brazil and Russia.

Table 2 indicates that market shares for established economies such as the EU and the US have been declining over the years 2001 to 2011 while those for emerging economies such as China have been increasing. Notably, the share of the global exports for the EU has declined from 19 percent in 1995 to 16 percent in 2011. On the other hand, the share of Chinese exports in the global market has risen from 4 percent in 1995 to 14 percent in 2011. Clearly, the decline in market shares for EU’s exports coincides with the emergence of new players such as China in the global market.

To understand the source of threat by China, it will be prudent to look at history of Chinese economic policies development and economic growth over last few decades. Trend in growth and development in China Before 1970, China engaged in gigantic planning and large-scale public investment which gave a head start to industrialization and economic development in the country. According to Saha (2006, 172), there were large-scale and small-scale state-owned enterprises which