China unhappy with EU's product safety call

BEIJING (Reuters) - The top EU trade official told China on Monday its reputation was at risk after a series of product safety scandals and that it must do more to tackle the problem.

The comments drew an icy response from a senior Chinese minister.

European Union Trade Commissioner Peter Mandelson also said Brussels was getting impatient with Beijing for failing to stamp out counterfeiting and might take the matter to the World Trade Organization (WTO).

The hard line reflects growing EU frustration over the bloc's ballooning trade deficit with China and what many firms see as unfair restrictions on their access to China's booming market.

Those issues, along with dismay that China has let the yuan's exchange rate against the euro fall sharply this year, are set to dominate a regular China-EU summit in Beijing on Wednesday.

Mandelson told a meeting on food safety that a rash of recalls of toys, toothpaste and other consumer goods had shaken global trust in China's exports. Beijing had to clamp down on defective goods to restore buyers' confidence.

"While product safety is not a problem restricted to China, it will nevertheless be central to the global perception of China's growing weight as a manufacturer," he said. "China's long-term success depends on its reputation."

While labeling recent Chinese efforts to crack down a "positive first step", he said comments by some officials that 99 percent of China's products were safe was not good enough.

"Europe imports half a billion euros worth of goods from China every day -- so even 1 percent is not acceptable," he said.

PIRACY PROBLEMS

Mandelson also tied worries about safety to what he called the "tidal wave" of counterfeits made in China.

According to the Organization for Economic Co-operation and Development, the trade in pirated consumer goods has reached $200 billion a year, equivalent to 2 percent of world trade, with many fakes coming from China.

"Some of those products -- fake medicines, fake car parts, fake aircraft parts -- carry huge risks," Mandelson said, demanding a "clearer demonstration" that Beijing was working to stamp out counterfeiters.

Chinese Vice Premier Wu Yi was not amused.

"I am extremely dissatisfied," an angry-sounding Wu, known as China's "Iron Lady", told reporters after Mandelson spoke.

Wu, who has been put in charge of the product safety brief, said earlier that the government was waging an unprecedented campaign to ensure product quality and food safety.

"I sincerely hope that developed nations can offer more to developing countries to enhance their standardization level, improve their food production technology and raise food safety."

Speaking later in the day, Mandelson said Wu had been upset only by his comment that eight out of 10 counterfeits discovered in Europe come from China. "But that's a fact. We must seek truth from the facts," the trade chief told reporters.

He said he appreciated Wu's leadership and acknowledged that Beijing now treated piracy more seriously; but Europe's constructive stance had not yielded concrete enough results.

Mandelson said the EU had so far held off lodging a complaint with the WTO, the Geneva-based trade watchdog, about Beijing's failure to give sufficient protection to intellectual property.

"But the sincerity of our approach, I must say, is being tested and I regret this. It is hard to see how much longer our patience can last if treatment does not improve," he said.

He said foreign and local firms were not on a level playing field when it came to enforcement of intellectual property laws and singled out French group Schneider as a litmus test.

The electrical engineering firm lost a patent infringement lawsuit in September and was ordered to pay $44 million in damages. Chinese firms that have lost similar cases have faced much milder penalties.

(1 euro = $1.48)

(Additional reporting by Chris Buckley; Editing by Alan Wheatley)