The survey, conducted by consultants for the EU executive, said China offered huge opportunities for European business, especially in services and environmentally friendly technology.
But it said China was not living up to its World Trade Organization commitments in many areas, notably in implementing the rules by provincial authorities and in intellectual property rights, and European industry was suffering as a result.
"Many Europeans see China as a globalization scare story," EU Trade Commissioner Peter Mandelson said in a foreword.
"But the economic evidence provided by this study of key sectors of EU industry and services suggests China is actually a globalization success story for Europe."
Noting a growing perception that China and Europe do not trade on genuinely equal terms, he said: "This study shows that Chinese non-tariff barriers cost EU operators no less than 21.4 billion euros a year in lost business opportunities."
The survey said growth in the services sector, where the EU has the most significant comparative advantage, was outpacing other sectors, but it was also one of the areas with some of the largest obstacles to trade and investment.
China's need for green technologies and services offered a huge opportunity to EU exporters -- a market estimated to be worth 98 billion euros by 2010, it said.
European companies were increasingly establishing production in China not to export more cheaply produced goods but to compete in the Chinese domestic market, the study said.
The EU, joined by the United States, filed its first WTO complaint against China last year over the treatment of European firms in the auto parts sector.
The report singled out other machinery, construction, finance and telecoms as other areas of unequal treatment and said Chinese government procurement often remained "opaque and discriminatory."
"European trade policy should press China to fully implement the spirit of its WTO commitments and support further liberalization of its economy," the study said.
It recommended dialogue, inclusion and technical assistance rather than protectionist measures or litigation to address trade problems with Beijing. ($1=.7608 Euro) (Reuters)
