Chinese and EU Clash Over Airline Emissions

Doug Young

China’s increasingly contentious trade relations with Europe
suffered another setback late last week, when the EU threatened to
fine Chinese airlines that were refusing to comply with a new
controversial program to reduce greenhouse gases. China responded
with its own threat by saying it won’t accept the EU’s planned
carbon tax, raising the prospect of a dangerous new trade war. This
latest in a recent series of trade conflicts between China and both
Europe and the US is developing into a troublesome pattern that
could spin out of control, endangering the nascent global economic
recovery. While the West bears some blame for initiating most of the
conflicts, China’s approach of angry public denials and refusal to
negotiate only makes the problems worse and leaves little room for
negotiated settlements.

The latest clash broke out last Thursday, when the EU threatened
fines and a ban from its airports for eight Chinese airlines that
failed to provide flight information required under Europe’s new
greenhouse gas reduction program. (English

article) China says the plan violates international law, and
has ordered the country’s airlines not to participate.

China responded to the EU’s latest threats by saying that Chinese
airlines won’t accept the tax, indicating it has no intention of
yielding in the matter. A resulting trade war could ultimately cost
Chinese airlines millions of dollars in lost revenue and undermine
their competitive position by forcing them to cut back or cancel
many of their flights to Europe.

China’s stance of angry defiance was nothing new, since leaders in
Beijing have opposed the plan for more than a year since it was
first announced. This approach of public anger and behind-the-scenes
defiance is fast becoming China’s preferred way for handling a
growing number of disputes with both Europe and the US, two of its
most important trading partners.

Two weeks ago, the EU moved closer to imposing punitive tariffs on
Chinese solar cells after formally launching a probe last year into
unfair state support for the sector. The EU has also threatened
similar action against Chinese telecoms equipment. In both cases,
China’s response has been largely to deny existence of a problem and
to threaten retaliatory action.

Meantime, China has also had similar clashes with the US, which has
imposed anti-dumping tariffs on Chinese solar cells and banned the
import of Chinese telecoms equipment over national security
concerns. Again, Beijing’s reaction has been to deny existence of a
problem and threaten retaliation.

In all of these cases, signs of grievances by both the EU and US
emerged months and sometimes more than a year before the imposition
of concrete punitive measures. And yet in all of the cases, China
did little or nothing to try to find a solution before the conflicts
reached crisis levels.

If China wants to avoid an escalation in these kinds of trade wars,
it needs to take a more proactive approach, both publicly through
more positive public relations and also behind the scenes by making
a real effort to negotiate solutions. A continuation of its current
approach of defiance and denial will only result in a growing number
of trade wars that hurt everyone and benefit no one.

Bottom line: Beijing needs to take a more positive,
conciliatory approach in its trade disputes, or risk a growing
number of damaging trade wars.

Doug Young has lived and worked in China for 15 years, much of
that as a journalist for Reuters writing about Chinese companies.
He currently lives in Shanghai where he teaches financial
journalism at Fudan University. He writes daily on his blog, Young´s
China Business Blog, commenting on the latest
developments at Chinese companies listed in the US, China and Hong
Kong. He is also author of a new book about the media in China, The
Party Line: How The Media Dictates Public Opinion in Modern China.