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Trade

EU pushes China to speed up process of opening markets to agricultural products

Both Brussels and Beijing hope for progress in latest summit as China seeks allies in US trade war

PUBLISHED : Saturday, 14 July, 2018, 9:00pm
UPDATED : Monday, 16 July, 2018, 1:16pm

China and the European Union are expected to seek substantial progress on increasing agricultural trade and accelerating investment treaty talks during a meeting on Monday in Beijing, the EU ambassador to China, Hans Dietmar Schweisgut, has told the South China Morning Post.

The 20th annual China-EU summit comes as the trade war between China and the US is escalating, which may plunge the world into an economic cold war and disrupt global trade patterns. Meanwhile, observers say China is keen on building alliances with the EU to counter Washington’s threats.

Because of frictions over issues including China’s demands for market economy status and the EU’s concern about China’s steel overcapacity, Beijing and Brussels failed to release joint statements on the summits in 2016 and 2017.

But both sides are likely to issue a joint statement this year, Schweisgut said.

He said he expected the EU and China to move closer to completion of the Geographic Indications Agreement (GIS), which “would present the first trade agreement ever between China and the European Union”.

China and the EU began GIS talks in 2011 in an effort to cement market recognition and property rights protection of each other’s food brands.

China and the EU have registered 100 products in each other’s market, including Scotch whisky, feta cheese and Bayerisches beer from the European side and Yantai apples and Panjin rice from China.

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EU data shows that the bloc’s agricultural exports to China accounted for 8 per cent of its total in that category in 2017, while agricultural imports from China totalled 5 per cent.

China has reopened its beef market to France and Ireland and the EU hopes the access will soon be extended to the bloc as a whole.

China suspended beef exports from the bloc after the outbreak of BSE, also known as mad cow disease, in 2001.

It gradually reopened the market in 2016, when it allowed exports from Hungary under the “Belt and Road Initiative”.

China has become the world’s second largest consumer of beef, with imports of US$3.3 billion last year, mainly from Brazil and Australia.

Eyeing the huge potential, the EU has stepped up efforts to re-enter the Chinese market. The bloc sent a delegation to China in May, and during President Emmanuel Macron’s visit to China, both countries agreed to cooperate on safety inspections of French beef.

US beef returned to the Chinese market in 2017 as part of a 100-day trade pact between Beijing and Washington. But with both countries now engaged in a tariff war, China has effectively put on hold all purchase agreements.

At the summit, Beijing and Brussels are expected to exchange market access offers to accelerate negotiations on a bilateral investment treaty, officially known as the Comprehensive Agreement on Investment (CAI).

They held the 18th round of talks on Thursday and Friday in hopes of making progress on the text of the deal, the Chinese Ministry of Commerce said. Market access offers are a key part of the talks.

“We have to see what will be in the offer, but it clearly shows the determination of both sides not only to keep the negotiations alive but make real progress,” Schweisgut said.

European business leaders have called for the CAI talks to be speeded up and to finish by the end of the year.

Schweisgut said it would be “very ambitious” to end the talks in six months as there are still many issues to be dealt with in depth. He said he “would not like to raise expectations” that both sides would be ready to sign a deal in the near future.

“We will not deviate from our view that we need an ambitious and comprehensive agreement, and we will not compromise on the quality of the agreement,” he said.

“On the overall market access issues, we hope we can make real progress, focusing on priorities and establishing a timetable to remove market access barriers,” he added.

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While China and the US are engaged in the trade war, imposing tariffs on each other and suspending negotiations, observers said Beijing was seeking an alliance with the EU – which is seen as a defender of the multilateral trading system – to counter pressure from Washington.

Business executives who attended a bilateral economic dialogue in late June said China did not raise the issues of market economy status and dumping because of overcapacity, long-term headaches that have previously strained ties.

Schweisgut reiterated that no country would benefit from a trade war and that the EU did not support actions taken outside of and in violation of WTO rules.

“This having been said,even if we don’t share the American approach, we share US concerns about China’s practices in areas such as industrial subsidies, technology transfers, support for SOEs and also informal barriers for the regulatory framework,” he said, referring to state-owned enterprises.

The US has sent mixed signals to the WTO. It has risked crippling the organisation’s authority by blocking the replacement of dispute settlement judges, but also agreed to work on new rules on technology transfers and state-owned enterprises.

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The EU and China have agreed to set up a working group to help the WTO defend the multilateral trading system and ensure its future relevance, and may talk about issues of market access, forced technology transfer and industrial policy.

“The WTO may be imperfect, but it is still the only organisation with clearly established rules and a dispute settlement mechanism that exists,” Schweisgut said.

“But to keep it credible, we need to reform and we need to fill in the gaps in its toolbox. We expect China to turn words into action now and fast, and join the EU in filling those gaps.”

“Establishing a working group on WTO reform would be, from a global perspective, the major deliverable we hope to achieve in the summit,” he added.

China has proposed changing the format of the business dialogue, a side event at the summit on Monday. The Ministry of Commerce proposed a small-scale dialogue between a 25-member business delegation and China’s leaders, including President Xi Jinping and Premier Li Keqiang, which may allow for more effective communication, business executives said.