EU and China to meet and discuss ways of dealing with Trump’s tough trade tariffs

The EU is concerned that Beijing is dividing the bloc through its investment, making member states less critical of China

PUBLISHED : Friday, 22 June, 2018, 5:27pm
UPDATED : Sunday, 24 June, 2018, 11:26pm

China and the European Union will seek ways to confront US President Donald Trump’s belligerence on trade during their high-level dialogue scheduled on Monday, in addition to settling their differences on investment restrictions.

Chinese vice-premier Liu He will meet with EU Commission vice-president Jyrki Katainen in Beijing on Monday where the two sides will not only confront US unilateralism, but also EU investment screening and Europe’s demand for greater access to Chinese markets.

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“The elephant in the room is Trump and his view on the global trade order. This issue will eclipse everything else,” said Jan Weidenfeld, analyst of Europe-China relations at the Mercator Institute for China Studies. “Both sides are under pressure to avoid a public spat, which would dilute their ability to signal to the Americans that they’re not happy.

“We are there – we are having a very frank conversation now, and we would be having a much franker discussion if we didn’t have all the trouble with the US administration.”

The economic dialogue was overshadowed by Trump’s decision to impose tariffs on China and US allies, including Europe.

“China and Europe are facing the common challenge of US actions in trade and multilateral institutions, which gives them more room to cooperate,” said Cui Hongjian, director of the Department for European Studies at the China Institute of International Studies.

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But the economic dialogue was meant for both sides to address grievances over market access and seek progress for an investment agreement. The EU has filed complaints to the World Trade Organisation on China’s forced technology transfer – a similar concern shared by the US.

The EU is also working to broaden its power to scrutinise foreign investment. The investment screening will create a framework at EU level regarding investments “likely to affect security and public order”, and will still undergo further negotiations.

The EU is concerned that China is dividing the bloc through its investment, making member states less critical of China, and that a large part of investment was in sectors covered by the “Made in China 2025” strategy which provides state support for crucial Chinese industries.

China’s ambassador to Germany Shi Mingde had already warned last month against protectionism in Europe and blamed countries like Germany for pushing investment screening at EU level.

“As the EU pursues this policy, China has a responsibility to express its concerns through dialogues like this one,” said Cui. “This should not become a method for protectionism, and also principles should be commonly applied and avoid discrimination.”

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The two sides may also discuss long-awaited investment arrangements, like the Comprehensive Agreement on Investments (CAI), first floated in 2013, and the China-EU joint investment fund, for which discussions began in 2015.

The EU, in turn, will demand that China open its economy more to European companies, especially in the hi-tech sector.

This week a survey by the European Chamber of Commerce said the EU-China relationship was at a “crucial” juncture, and warned that China may lose out on future foreign investment if it did not take “meaningful” steps to open its economy further.

Mats Harborn, president of the European Union Chamber of Commerce, said that, for example, foreign companies are only allowed to invest in about 30 petrol stations in China.

Europe is developing its own Asia-bound comprehensive investment and development initiative under the banner of EU-Asia connectivity, and the two sides will try to work out how the project can complement, rather than clash with, China’s “Belt and Road Initiative”.

“The EU will have to explain to China what it means by ‘connectivity’,” said Weidenfeld. “China’s belt and road is more narrow and emphasises an ‘economic development first’ approach, while the EU’s connectivity plan will stress principles like human and individual rights, like education.”

The EU’s connectivity plan, which may be presented to the European Council as early as October, is also trying to remind countries in the European periphery, like the Balkans where China’s belt and road strategy has a strong presence, that the countries continue to have a more attractive European alternative, added Weidenfeld.