BRUSSELS, Belgium - European Union trade chief Peter Mandelson announced Thursday he will launch a review of trade ties with China this year, saying Europe needs a new strategy to handle the EU's "biggest" trade policy challenge in the years ahead.

"Europe must get China right ¡ª as a threat, an opportunity and prospective partner," Mandelson said in a speech delivered in the northeastern Swiss town of Ermatingen, according to the draft provided by his office.

European Union Trade Commissioner Peter Mandelson addresses a news conference at the European Commission headquarters in Brussels April 26, 2006. [Reuters]

Mandelson said in the wake of increasing trade spats with Beijing over issues such as textiles, shoes and piracy, "we must examine ... our political and economic ties with China."

He called China "the biggest single challenge of globalization in the trade field" and pledged to start a review of EU trade ties with Beijing after September.

Mandelson called for the European bloc's trade policy to be realigned in years ahead to take advantage of growing economies across Asia and in Brazil.

"In the past we were running to catch up with the higher productivity of the United States. Now we need to run with one eye on those out in front and the other watching new countries ¡ª China, India, Brazil ¡ª coming up behind," said Mandelson.

"I will be using the second half of this year to define a new, forward-looking agenda that helps to boost our competitive performance at home and abroad, an agenda that focuses on hard, economic priorities and adapts our thinking to the realities and challenges of globalization."

Mandelson cited statistics showing that China alone has seen a 17 percent annual growth rate in trade between 1994-2004, "and now trades as much as the EU did in 1994."

He said India and China's share of manufactured goods on the world market could account for 50 percent by 2020.

Mandelson said the EU review would focus specifically on market access, including reduction of tariffs, and non-tariff barriers.

The only way to answer the new competitors, he said, was for the 25-nation bloc to push ahead with more market reforms to become more competitive. The European Commission must "show leadership to push for change, even if it is painful."

The EU head office's call for the 25 EU governments to open up their services markets, however, has been met with stiff resistance in many countries, including France, which has tried to bolster French companies in the wake of takeover bids from other European competitors in the energy sector.

Mandelson, the EU's top trade negotiator at the world trade talks, reiterated that getting a deal this year in the so-called Doha round was his "paramount priority."

(For more biz stories, please visit Industry Updates)