Stockholm (Ekonamik) – Chinese Prime Minister Li Keqiang met with European Commission president Jean-Claude Juncker and European Council president Donald Tusk for a decisive China-EU summit in Brussels Tuesday amid concerns that the summit would fail to produce a joint statement due to the thorny issues dividing the trade partners.
In the event, a joint statement was issued after the 21st EU-China summit after all, but it remains to be seen how far the summit’s agreements will go towards redressing the issues outstanding.
The summit comes at a precarious time for the EU. It is imperative for the bloc to show the U.S. that a trade war is not the best way to open up China, at the same time as it is trying to avoid escalating its own trade war with the U.S. – while simultaneously attempting to coax Beijing to agree on key trade issues. It is critical for the EU that any emerging deal with China does not allow the U.S. to gain unreasonable advantages over European firms in China, all the while keeping said deal compatible with WTO regulations.
But Chinese pledges on opening its markets up more to European companies and fast tracking a new investment agreement by 2020 to secure better market access have stalled, as China has focused more recently on placating the United States in the trade war between the economic powerhouses. In addition, the recent foreign investment law adopted in China fails to address European concerns on technological transfers, prohibited sectors and level regulation for both foreign and domestic imports.
China is the EU’s second largest trading partner, with €1 billion in daily trade between them, and European companies are currently the largest investors in China. European companies complain of being discriminated against in China in favour of state-subsidised local companies, however, ergo that Chinese companies have free access to European markets but European companies do not have the same access to Chinese markets.
In addition, the EU is concerned over Chinese “predatory investment” – investments made by China particularly in the poorer south and southeast of the bloc, which in turn could undermine unity on EU-China strategy. Unanimity on a vote on, say, human rights, in the European Council can be stymied by those countries, such as Hungary or Greece, who are courted by China, giving Chinese interests an advantage over European decision making.
“EU-China – A strategic outlook”, an EU paper issued in March, calls China simultaneously a cooperation partner with closely aligned objectives, a negotiating partner with whom a balance of interests needs to be found, an economic competitor in the pursuit of technological leadership, and, in a notable sharpening of tone, “a systemic rival promoting alternative models of governance.”
The paper calls for differentiated policies of engagement depending on the issues at stake. It also calls for deepening engagement with China to promote common interests at the global level based on clearly defined interests and principles, seeking more balanced and reciprocal governing the economic relationship, and responding by adapting to economic realities and strengthening the EU’s own domestic policies and industrial base.
In the event, Mr Tusk made remarks following the summit in which he expressed an agreement with China to “address the issue of industrial subsidies”:
“The two sides reaffirm their joint commitment to cooperate on WTO reform to ensure its continued relevance, and allow it to address global trade challenges. To this end, both sides will intensify the discussions with the aim of strengthening international rules on industrial subsidies,” Mr Tusk quoted from the joint statement.
“It is a breakthrough,” he added. “For the first time, China has agreed to engage with Europe on this key priority for WTO reform. We hope that these talks will progress speedily in view of the G20 summit in Osaka, so that we can defend the rules-based international trading system.”
Image: EU-Gipfel in Brüssel: man will mit China “auf Augenhöhe” verhandeln, by Markusszy (Wikimedia Commons)