7.

Import country
A bilateral promotion of imports, especially between Europe and China,
has numerous advantages and results in higher exports, in more
equilibrated and sustainable trade balance, in industrial specialisation and
in the fulfilment of production gaps in differentiated products lines. These
agreements are not only put into place to increase trade, but to integrate
other countries and improve foreign relationships.
Richard Newfarmer, the World’s Bank Special representative to the
United Nations said: “Bilateral and plurilateral agreements have spread
throughout the global economy, and at an accelerating pace in the 1990s.
A major concern with the proliferation of regional trading agreements is
that they introduce preferences for some countries -- and that's fine -- but
at the cost of discrimination against other countries. This means that,
say, when Tunisia signs an agreement with Europe, Europe grants
Tunisia duty-free access to its market, but producers in other countries
competing with Tunisia have to pay Europe’s tariff and thus do not have
the same level of access. As a result, countries excluded from these types
of agreements tend to lose, even though countries signing the agreements
may benefit.”
(http://discuss.worldbank.org/content/interview/detail/1791/)
As our import country we chose China. In 2004, China replaced Germany
and the United Kingdom to become the fourth largest market for U.S.
goods and remains the fastest growing major U.S. export market.
China is the second largest source of U.S. imports of merchandise ($243
billion in 2005) after Canada ($287 billion). PRC imports surpassed
those of Mexico in 2003 and of Japan in 2002. China now accounts for
over 14% of U.S. imports (2005), up from 12% in 2003, 8% in 1999, and
3% in 1990, although this share still falls short of Japan’s 18% in the
early 1990s. While U.S. trade with China is unbalanced, the same is also
true for Europe and Japan, although to a lesser extent. China runs a trade
surplus with the world’s three major economic centers. The U.S. bilateral
deficit in 2005 ($201 billion), however, was 1.6 times larger than that of
the EU-15 ($121.8 billion; the EU-25 deficit was $133 billion) and seven
times that of Japan ($28.5 billion).
However the U.S. trade deficit with China is rising with the overall U.S.
trade deficit or growing at a slightly faster rate. Between 1996 and 1998,
China’s share of the overall U.S. merchandise trade deficit averaged 24%;
between 1999 and 2001, China’s share was 18%, and between 2002 and
2004, 22%. In 2005, the United States trade deficit with China
constituted 26% of its global trade deficit. Over the same period, the
shares of the U.S. deficit in goods trade accounted for by Japan, the
Association of Southeast Asian Nations (ASEAN), and the East Asian
newly industrialized countries (NICs) have decreased while the European
Union’s share has increased.
Figure 1. China’s Exports, Imports, and Balance of Merchandise
Trade, 1983-2005

QuickTimeª and a
TIFF (LZW) decompressor
are needed to see this picture.
As one can see in the first figure, China has been achieving a continuous
trade surplus over the past 15 to 20 years, except in 1993. In the second
graph we can see the trade balance between the EU and China. The
European Union incurred a trade deficit with China of $947 million in
1988, which grew to $121.8 billion in 2005. According to Chinese
figures, however, the EU trade deficit with China began in the late 1990s
and grew to $63 billion in 2005.

Figure 2. European Union Merchandise Imports,

Exports, and Balance of Trade with China, 1983-2005

QuickTimeª and a
TIFF (LZW) decompressor
are needed to see this picture.
When focusing on the Motor Vehicle Market, China is the third largest
auto market and fourth largest auto producer. In 2005, china became a net
exporter of auto vehicles, with exports of 172,700 vehicles and imports if
162,000 vehicles. Most of China’s vehicle exports are sold in
Middle Eastern, North African, and South American countries. In
addition, China has become a major supplier of motorcycles to Southeast
Asia.

In order to meet its commitment to the WHO, China has cut import taxes
on some cars and auto parts. Tariffs on cars, SUVs and mini-buses have
been cut to 25 %. Import tariffs for auto parts have also been reduced to
10%, from 25% earlier. This of course has a positive effect on bringing
down prices on of imported cars. In this sense, it would have a
psychological effect on consumers, offsetting the negative impact of the
new levy on luxurious cars, which the government began to impose on
some luxury goods. Foreign investment into China has been soaring over
the past years due to a steady decrease of the import taxes.
(http://www.atimes.com/atimes/China_Business/HF15Cb05.html)
7.1 Normative Trade agreement
Looking at the current agreements set in place between Europe and
China, we would like to propose some points of a trade agreement
between Spain and China;
• Further reduction of the import tariffs into China, to 20%
• Possible Free Trade agreement in the future,
• Recognizing the essential role of private investment, both
domestic and foreign, in furthering growth, creating jobs,
expanding trade, improving technology, and enhancing economic
development;
• Joint Venture between Seat and Chinese car manufacturer
• Both countries should provide adequate protection and
enforcement of intellectual property rights
• Making sure that trade and environmental policies support
sustainable development

8. Criteria for introducing a product

When introducing a new product into a country, there are several aspects,
which have to be looked at, and considered carefully.
In order to avoid mistakes it is important for a international company,
such as Seat to first of all get local help, engage experts in order to
understand their culture. Furthermore it is important to be partners and
not adversaries. Managers and corporations have to be aware of culture
clashing. That means for instance knowledge of the language, patience
and manners. Time management and production schedule are also
important issues when launching a new product.
On the logistical side, Seat would need a logistical provider which can
service the entire procedure. They will have to overcome the regulations,
problems with inadequate infrastructure, local custom procedures no
common language and the geographical distances. Currently China has a
underdeveloped transport infrastructure and immature logistics industry.
However a city with a well established logistical infrastructure is Hong
Kong and Shanghai. Both cities have proved themselves as key logistical
hubs for China.

If Seat considers manufacturing the Tribu locally, then they should

consider taking advantage of the favorable infrastructures and the
presence of complementary suppliers and buyers in certain provinces.
Hubei Province, currently the fourth-largest car production center in
China, is home to two key players– Hong Kong-listed Dongfeng Motor
Co. (which has joint-ventures with Nissan Motor Co., Honda Motor Co.
and PSA Peugeot Citroën) and Aeolux Automotive Company. The
province’s automotive clustering has fostered hundreds of auto parts
manufacturers, both local and foreign, in its capital, Wuhan. This will
enable them to cut their costs and tap into the market much quicker.
The Chinese and Spanish governments signed an ‘Agreement for
Cultural, Educational and Scientific and Technological Cooperation’ in
1981.

Bilateral important agreements between Spain and China:

- On behalf of the respective government of their own, the joint
communiqué on the establishment of the diplomatic relations was
signed in Paris by the Chinese and Spanish ambassadors to France
(March 9, 1973)
- China and Spain signed the trade agreement and agreement for
civil aviation and air-transportation (June 19, 1978)
- The two sides signed agreement for cultural, educational and sci-
tech cooperation (April 4, 1981)
- The two countries signed agreement for developing economy and
industrial cooperation (November 15, 1984)
- The two sides signed the fundamental agreement for sci-tech
cooperation (September 5, 1985)
- The two countries signed agreement on avoiding dual taxation and
prevention from tax-evasion (November 22, 1990)
- The two sides signed agreement for mutually encouraging and
protecting investment (February 6, 1992)
- The two countries signed the treaty on the aid and assistance of
civil, commercial and legal affairs (May 2, 1992)
- The two sides signed the agreement on the cooperation for the two
governments to clamp down on the organized criminal activities
(June 25, 2000)
Source:
(http://www.fmprc.gov.cn/eng/wjb/zzjg/xos/gjlb/3356/t16990.htm)

To date China and Spain are widely know for having well established
relations between each other, due to the mentioned agreements over the
past. In addition to increase the mutual understanding the presence of
Spanish enterprises in China has been facilitated. The Spanish Institute
for Foreign Trade (ICEX) has been promoting and developing the
international presence of Spanish companies abroad

Currently China exports a lot goods to Spain, but the imports from Spain
is comparatively small.
The total amount of Exports from China to Spain was just over USD 16,
5 billion in 2007. The amount of imports to China were just over USD
4,4 billion.

9. ICEX
The Spanish Institute of Foreign Trade (ICEX), is a public entity
belonging to the Secretariat of State of Tourism and Trade. It provides
services for Spanish companies and aims to promote and help them to
achieve an international projection by:
• Designing and implementing marketing programs in foreign markets.
• Providing information on Spanish products and on international
markets.
• Promoting the technical skills of company managers and training
foreign trade experts.
• Promoting investment as well as industrial projects and business
cooperation in foreign markets.
It would be of great matter enhancing the investment partnerships and
achieving bilateral partnerships between China and Spain.
Enhancing the bilateral strategic partnership can be achieved by
establishing joint ventures and common businesses. These ventures
would take advantage of the facilities and possibilities for growth in both
countries, as well as cooperating in third markets where enterprises of
either country have prominent positions, such as Latin America, Europe
and the US in the case of Spanish companies and Asia and Africa in the
case of Chinese ones.

At present, Spain only has about 450 companies operating at different

levels in China. This figure must notably increase for the Spanish
business network in China to be comparable to those of other foreign
countries with similar economies.

In 2000, the ICEX organized for the first time ‘EXPORTA’. Its aim is to
be the most important meeting place for companies that have an
international focus as well as for service provider organizations,
associations and public and private institutions that promote
international competitiveness for these companies.

Spanish Chinese Chamber of Commerce

The Spanish chamber of commerce in China is an organization that aims
to promote the commercial relations between Spain and China, along
with the interests of Chamber members.
The Chamber adopts more pro-active measures to encourage trade, like
entering into preferential trade agreements with individual countries and
regional economic communities and enhancing the lines of credit to
countries. Additionally they develop special packages to push Spanish
exports to i.e. Chinese market.

Public-private partnership initiatives to create “Chinese Promotion” is

crucial, when focusing on increasing exports.
Further, the chamber of commerce calls its attention to barriers
encountered in order to fully reach the potential of trade with China -
from prohibitive costs of shipping, shortage of shipping line and high
transaction costs.

http://www.spanishchamber-ch.com/camara/objetivos.htm#
http://www.investchaoyang.gov.cn/english/showArticle.do?articleId=628
6
http://www.atimes.com/atimes/China_Business/HF15Cb05.html
http://news.xinhuanet.com/english/2005-11/07/content_3744967.htm