Vice-President of the European Commission came to Beijing for fairness in trade

Deputy Head of the European Commission (EC) Valdis Dombrovskis, who is responsible for trade issues, is on an official visit to China from September 23 to 26. According to the South China Morning Post, before Beijing, the European Commissioner visited the authoritative economic “Bund Summit” in Shanghai and the city of Suzhou to meet with businessmen.

For example, speaking in Shanghai, Dombrovskis assured that the EU would take a “narrow in scope and focus” approach to national security, while separating it from “broader issues related to economic sustainability or a level playing field.”

According to the deputy head of the EC, the EU is now discussing a policy of “risk reduction” regarding China, and not “decoupling” (an expression describing a hypothetical severance of economic ties. – Vedomosti). The EU has no intention of separating from China but must defend itself when its openness is abused, he stressed: “We are also committed to free and fair global trade. And fair is the key word here.”

At the same time, Dombrovskis criticized China’s foreign policy and its position on military operations in Ukraine. “Territorial integrity has always been a key principle of international diplomacy for China. Therefore, it is very difficult for us to understand China’s position [по поддержке России]”, – he said.

Already in Beijing, the European Commissioner attended a meeting of the tenth round of the EU-PRC dialogue on the economy. He warned that Brussels will be “persistent” in matters of fair trade and protecting its interests (quote from the EU press service website). The EU representative’s counterpart at the Beijing negotiations was Vice Premier of the State Council of China He Lifeng.

The Chinese Foreign Ministry previously said that the EU should not blame its partner for the emerging trade imbalance, but should lift export sanctions in order to eliminate this problem. China is expected to demand clarification regarding the EU’s de-risking strategy, which they refuse to consider protectionist because it does not protect the interests of a particular country.

Following the meeting, Dombrovskis said that Brussels and Beijing agreed to resume a permanent dialogue on macroeconomic and financial issues. He assured that European businesses want to remain part of the “Chinese success story.” The European official noted that the EU does not intend to sever all ties with China, despite steps “to reduce economic dependence.”

However, Dombrovskis, speaking at Tsinghua University, said China “could do a lot” to reduce European risk perceptions. In particular, Brussels believes that Beijing does not create equal business conditions for foreign players.

The 2023 Foreign Relations Law, which gives China the right to take countermeasures against actions that threaten its sovereignty and violates international law, and the updated anti-espionage law leave “too much room for interpretation.” “This means European companies are finding it difficult to understand their obligations <...> a factor that significantly reduces business confidence and deters new investment in China,” Dombrovskis added.

Statistics in the second quarter of 2023 indeed recorded a drop in foreign direct investment (FDI) flows to China to the lowest levels in 25 years of observation ($4.9 billion). Chinese Foreign Ministry spokesman Wang Wenbin called his country “legal” at a press conference on September 25. “China is not a source of risk, but a reliable force for preventing and eliminating risks,” he expressed Beijing’s position.

At the same time, on September 13, EC President Ursula von der Leyen announced that the European Commission was launching an investigation into Chinese subsidies for the production of electric vehicles, since the world market is “flooded” with cheap Chinese cars (in total, China produces up to 60% of global production).

The EC will have up to 13 months to assess whether, at a minimum, tariffs should be introduced above the EU standard rate of 10% on cars. At the end of August, a US delegation led by Commerce Secretary Gina Raimondo also flew to China in an attempt to agree on rules for “healthy competition”. At the same time, Raimondo also emphasized that Washington will not compromise in the field of national security.

Now both sides – the EU and China – are keeping their finger on the pulse and trying to build a dialogue, since the points of tension are clear, says Vladislav Belov, head of the Center for Country Studies at the Institute of Europe of the Russian Academy of Sciences. The European Union aims to overcome critical dependence on China, but this is unlikely to succeed due to the structure of trade – we are not talking about raw materials, but about a large list of items. Brussels will continue to maintain an approach to Beijing that is described by the triad of “partner, competitor, systemic rival” with minimal support for value competition.

One of Dombrovskis’ specific goals may be an attempt to reduce the level of tension that has developed over the past year, especially after the statement by German Foreign Minister Annalena Baerbock, who recently called Chinese President Xi Jinping a dictator. Otherwise, the parties discuss economic issues and mutual investments, each side resorting to restrictions in sensitive industries. Belov calls Dombrovskis a “reasonable European Commissioner,” which is also evident from the fact that he is not currently focusing on the Taiwan problem.

The fact that the EU representative is now talking about “risk reduction” and not “decoupling” can already be considered partly a success of Chinese diplomacy, says Sergei Lukonin, head of the Chinese economics and politics sector at the Center for Asia-Pacific Studies at IMEMO RAS. He agrees that this generally indicates a decrease in tension in relations between the EU and China and even a slight rapprochement, but without breakthroughs in them. The Chinese are still trying to convince the EU to build relations with the EU without regard to the United States, and Brussels partly uses this approach. At the same time, Brussels will still introduce additional duties, for example on electric vehicles, Lukonin is sure.