EU officials play down expectations for high-level summit with China

Key Concepts:

EU-China trade relationship, trade deficit, subsidies, market access, rare earth elements, overcapacity, fair competition, level playing field, trade distorting measures, electric vehicle duties, protectionism, anti-dumping probe, cognac exports, geopolitics, Russia-Ukraine war, environmental policy, derisking, decoupling.

EU-China Trade Relationship Overview:

• The EU-China trade relationship has grown 300-fold in the last 50 years, representing nearly 30% of global commerce.
• EU officials express concerns about a trade deficit exceeding $450 billion, subsidy disputes, limited market access for European companies in China, restricted exports of rare earth elements from China, and overcapacity in certain Chinese industries. These issues are seen as creating an unstable trading environment.

EU Concerns and Demands:

• The EU wants China to address "trade distorting measures," "unfair competition," and "unlevel playing field challenges" to ensure fair competition.
• The European Commission downplays expectations for a quick resolution to these issues.

EU-China Summit:

• The summit was originally planned as a two-day event but was shortened to a single day.
• No major trade announcements are expected.
• The summit is viewed as an opportunity for leaders to have "frank, honest conversations."

Trade Disputes and Retaliatory Measures:

• The EU imposed duties of up to 38% on Chinese electric vehicles due to alleged unfair state subsidies.
• China accuses the EU of protectionism and has imposed a 35% duty on EU brandy following an anti-dumping probe.
• China imports approximately 1.6 billion euros worth of cognac from Europe annually.
• Pauline Bastidong, director of trade and economic affairs at Spirit Europe, notes that cognac exports have roughly halved from October to May due to the Chinese duty.
• Spirit Europe is requesting the removal of the duty on EU brandy as a precondition for improved EU-China relations. "Since our members have done nothing wrong, uh we're still asking for the whole thing to to disappear and I think it's also a strong request uh of the EU as a precondition to see an improvement in the relationship between the EU and China."

Geopolitical Considerations:

• The EU aims to persuade China to distance itself from Russia regarding the war in Ukraine.
• The EU and China have differing views on various geopolitical issues.

Areas of Potential Cooperation:

• Environmental policy is identified as an area where common ground can be found.
• Bernard Dwit, Chairman of the Belgian Chinese Chamber of Commerce, emphasizes the importance of collaboration on green economy initiatives and joint research. "We are now confronted to decisions to be taken for a greener uh economy for instance for some common research in these fields because it's uh our interest here on earth to have a common solution and to join forces to fight that"

EU Strategy: Derisking, Not Decoupling:

• The EU's stated strategy is to "derisk" its relationship with China, rather than "decouple" entirely.

Conclusion:

The EU-China relationship faces significant challenges related to trade imbalances, unfair competition, and geopolitical tensions. While no immediate breakthroughs are expected, the EU-China summit provides an opportunity for dialogue and engagement. The EU seeks a more balanced relationship that benefits both sides, focusing on derisking rather than decoupling, and exploring areas of cooperation such as environmental policy.