EU calls on China to lower barriers to correct trade balance

Lowering barriers to European exports will be the EU’s demand for China at the September session of the EU-China High-Level Economic and Trade Dialogue due to the large trade deficit in China’s favor: the imbalance reached almost 400 billion euros last year, according to the Financial Times. Brussels explains this indicator by the “discriminatory policy of the PRC” and reserves the right to introduce new economic restrictions if Beijing does not meet halfway.

“The trade relationship between China and the EU is very unbalanced. China has a huge trade surplus, the level of openness on the part of China and the EU is not the same,” commented the Deputy Head of the European Commission (EC), Valdis Dombrovskis, who is in charge of trade issues.

European Commission President Ursula von der Leyen said back in April that over the past 10 years, the EU trade deficit with China has more than tripled, reaching “almost 400 billion euros” in 2022 (365 billion euros in 2016). . it was only 145 billion). Brussels has previously urged Beijing to open its market, for example, to European digital communications products and services. A number of barriers also arose for purely political reasons – for example, in 2021, the PRC began blocking Lithuanian cargo due to the opening of a representative office of Taiwan in Vilnius.

Dombrovskis warned that after the upcoming discussions on the topic of imbalance with the Chinese and the lack of reaction from their side, Brussels could use “trade weapons”. These are trade boycotts, the ability to block Chinese investment in EU companies, the closure of public procurement markets for companies from China and other countries that do not seek to open their markets.

Dombrovskis stressed that the EU is now discussing only “risk reduction” with China, not “decoupling”, referring to Beijing’s continued dominance in the field of green technologies. “We need to find ways to cooperate with China while eliminating risks and possible strategic dependencies,” said the deputy head of the EC. Probably, in such a model of the EU’s behavior towards the PRC, it was not without the influence of the Americans. Back in March 2023, the US promised to provide EU companies with access to some tax breaks and subsidies under the 2022 US Inflation Reduction Act (IRA), while calling for a tougher policy on China.

The day before, Head of the Office of the Foreign Affairs Commission of the CPC Central Committee and Chinese Foreign Minister Wang Yi held a telephone conversation with EU High Representative for Foreign Affairs and Security Policy Josep Borrell and confirmed his visit in the coming autumn. It has already broken down twice – in April of this year due to Borrell’s infection with the coronavirus, and in July – against the backdrop of the disappearance of former Chinese Foreign Minister Qin Gang from public space. According to Wang Yi, China and the EU need to create even more dialogue mechanisms to fill the gaps that have formed during the three years of the pandemic. He called “partnership based on cooperation” the main feature in the relations between the two sides. Borrell noted that the EU’s Global Gateway and China’s Belt and Road infrastructure projects complement each other. The diplomats also discussed the situation in Ukraine and Niger.

China and European countries are already working on certain trade issues of mutual interest. Thus, on July 29, France and China agreed to work together on a regulatory framework for European cosmetics exports to China. This working group will seek to establish cooperation in the field of intellectual property, as well as work on standards and verifications. In early summer, China’s National Institute of Food and Drug Administration introduced new rules for importing cosmetics from Europe that require its cosmetics firms to provide details ranging from ingredients and manufacturing process details to raw material sources and exact formulations. European companies believe that this may lead to the disclosure of their technological secrets, since most of the data will be stored in the PRC state database.

Europe does not really intend to introduce new economic restrictions against China, Vladislav Belov, head of the Center for Country Studies at the Institute of Europe of the Russian Academy of Sciences, believes. This Asian country remains the largest trading partner of the European Union, in particular Germany, and the degree of interdependence of the two large economies is very high. Under such conditions, the expert continues, neither side is interested in initiating potential trade wars. “I think that with such statements, the European bureaucrats are more likely to throw in a trial balloon to see the reaction of Beijing,” says Belov. “This is an element of diplomatic pressure in order to get some economic preferences from the Chinese.”

According to Belov, a hypothetical confrontation between Europe and China would be in the best interests of the United States. He recalled that since 2016 the EU has been pursuing a foreign policy within the framework of its strategic autonomy. “Europe needs Beijing as a balancer: Brussels cooperates with the Chinese in order to reduce Europe’s dependence on the United States and, conversely, cooperates with Washington to reduce dependence on China. A potential confrontation with one of the parties destroys this configuration,” the expert noted.

The Chinese are experienced and tough negotiators and will continue to defend their commercial interests, says Andrey Karneev, head of the HSE School of Oriental Studies. It is still difficult to predict the outcome of the negotiations in September, but most likely there will be bargaining – for expanded access to the Chinese market, Beijing may ask for something in return and, most likely, a compromise will be found, the expert believes. Traditionally, the PRC has always found it easier to negotiate with the EU, since it, unlike the United States, politicizes economic issues to a lesser extent, Karneev adds. At the same time, Brussels continues to criticize Beijing for its extensive measures to support its industry and the “non-market” practices in the economy, but it is quite possible to wonder whether the West itself actually observes all these rules, he concludes.