US President Donald Trump’s attacks on the international trading system, by imposing tariffs and engaging in virulent anti-trade rhetoric, have left America’s commercial partners worldwide scrambling for an appropriate response. In times of geopolitical uncertainty, the 20th EU-China summit in Beijing was an opportunity to show that cooperation was important not only for Europe and China, but also for the rest of the world. Europe and China supported and strengthened the open, rules-based system of global governance[i]. Progress was also made between Beijing and Brussels on issues like climate change, foreign policy and Eurasian connectivity.
Of course, the European Union as a global political actor and a major trading power must also pursue its legitimate interests. In this respect Brussels had concrete expectations concerning the direction of its future cooperation under the comprehensive strategic partnership with China.
The changing climate on trade and investment is a good moment for China to show public commitment and take concrete steps to open markets and establish a level playing field for European companies. At the summit, the two sides exchanged market access offers for a Comprehensive Agreement on Investment between the EU and China. It should lead to an ambitious and comprehensive deal to open more sectors and provide investment protection above and beyond the standards already set out in the 27 existing bilateral agreements between China and EU countries.
This summit was an opportunity for the EU and China to prove their joint support for the WTO as the center of the rules-based multilateral trading system, and to turn words into action by filling the gaps with new rules for a future global economy where the World Trade Organisation can meet new challenges. The bilateral WTO working group – agreed in Beijing a few weeks ago by European Commission Vice-President Jyrki Katainen and Chinese Vice-Premier Liu He – should be a place where the EU and China show that they are ready to act now, swiftly and substantially, to show that our cooperation produces more robust results.
Last but not least, in a world that is facing unprecedented climate and resource challenges, China and the EU recognised both the need for and the opportunities that come from transformation to a green, low carbon, circular economy. The EU and China are leading through action on climate, to deliver their Paris commitments by moving from words to policies and measures, such as carbon pricing and emissions trading, that cut emissions now and into the future. Both sides agreed to accelerate reforms to transform a wasteful linear economy into a resource-efficient circular economy for the good of the environment, jobs and competitiveness. Together they showed others across the world that ambitious action is possible and that it is a part of a strategy for a strong economy.
United against the tariffs
At the previous such summit, last year, the two parties had so little to say about their relationship that they did not even issue a joint statement. This year, the two parties upheld “free trade and the multilateral order” in the face of what appears to be a new common enemy. Trump’s imposition of tariffs on steel and aluminum as well as his threats of new duties on the automotive industry have unnerved Washington’s trading partners throughout Europe, particularly Germany. Likewise, China has been in the crosshairs of Trump’s tariff threats for months. The US administration recently imposed 25 percent tariffs on 818 Chinese goods, worth approximately $34 billion (€29.1 billion), which came into force early this month. A second round of tariffs on products worth $16 billion is under review and could soon be added to the US measures. The decisions prompted an immediate response from Beijing, with authorities there announcing they would hit back dollar for dollar.[ii] The message from the Chinese capital was clear, and it was more than clear who the message was intended for.
“It is a common duty of Europe and China, America and Russia, not to destroy this (world) order, but to improve it. Not to start trade wars…but to bravely and responsibly reform the rules-based international order,” European Council President Donald Tusk said in Beijing. ”
Following Beijing’s retaliation, Trump threatened to impose 10 percent tariffs on $200 billion worth of Chinese imports. China has since accused the US of expanding the scope of the trade conflict and stressed that it would not back down from a trade fight.
Against this backdrop, some say Beijing hopes to join forces with Brussels to present a unified front against Washington’s unilateral “America First” policies.[iii] Together, they would have significant economic clout, as China and the EU account for more than a third of global economic output and almost half of global trade.
“The joint statement is exciting. It lists so many points of convergence, and so many points of action. I can only think of Donald Trump as the hidden producer of this communique,” commented François Godement, an expert in EU-China relations at the European Council on Foreign Relations.[iv]
Some disagreements remain
Despite the two sides finding themselves on the same page with regard to tariffs, observers say it’s unlikely that Brussels and Beijing will form an alliance against Washington. The summit this time was merely expected to produce a modest communique, affirming support for a multilateral trading system, but nothing more. That’s because the EU and China have significant disagreements when it comes to issues like market access and intellectual property rights.[v]
A recent survey conducted by the EU Chamber of Commerce in China concluded that China is “one of the most restrictive economies in the world.” European and American companies operating in the Asian giant have long complained that they face an array of regulatory issues, hindering a level playing field on the Chinese market and their ability to freely do business there.
“Regulatory issues range from ambiguous rules to discretionary enforcement of policy to specific problems like access to licenses and financing or equal access to public procurement bids,” said Mats Harborn, president of the European Union Chamber of Commerce in China.
“All of these challenges are especially acute for small and medium-sized enterprises, as they lack the resources and manpower to navigate these problems as easily as their larger counterparts,” he added.
Another bone of contention is intellectual property, with the Chinese government accused of strong-arming foreign companies into sharing and disclosing their technologies by, for instance, entering into partnerships with local companies.
Beijing’s “Made in China 2025” initiative, an ambitious plan to close the Asian giant’s technology gap with the West, is also viewed as exploitative by many in the EU. The initiative seeks to turn China from being the world’s factory into a global technology leader, including in biotech, robotics, aerospace and clean-energy cars.
European officials and business executives routinely express their concerns and dissatisfaction with Beijing’s moves to lay its hands-on new technologies. Apart from trade and market access, the two sides have recently clashed over the Eurasian connectivity vision of China’s massive Belt and Road Initiative (BRI), an ambitious $1 trillion infrastructure project that aims to bolster China’s trade and investment links with economies in Asia, Africa and Europe.
The communiqué can seem mainly designed to rattle the US administration. China perceives Trump as a harbinger of America’s future as an angry deindustrialized power. But the Europeans hope that Trump is just an aberration; they are waiting to see what will happen in the mid-term elections or the next presidential elections. It is unclear if Trump himself is at all impressed by the diplomatic rhetoric. Nonetheless, the EU made no concessions. It merely repeated its mantra on territorial sovereignty and international law while promoting the three pillars of the United Nations (including human rights, which China does not like to be remined of). Another reality check for the agreement followed in Tokyo, where the EU signed the long-awaited Economic Partnership Agreement (EPA) and a Strategic Partnership Agreement. Had it not been for the advent of the Trump administration, Japan would still be prioritizing the Trans-Pacific Partnership and trade relations with Washington.[vi] Despite its lack of substance, the communiqué grabbed the attention of many media outlets. By comparison, the clear and effective agreements between the EU and Japan got almost no press. Yet, in the long term, they will matter far more than another convoluted attempt to find common ground with China. Transatlantic relations will survive Trump, and the EU can disagree with China without becoming locked in permanent conflict with it.
No news from the Eastern front
The past ten days were very important for the EU and its new partners in Asia – namely China and Japan. Following the EU – China and EU – Japan Summits which resulted in historical agreements being signed the EU is slowly strengthening its relations with its Eastern allies. The meeting in Tokyo was supposed to happen before the one in Beijing – making a political point about who is the EU’s first choice of partner. But, after a deadly flood in Japan forced Prime Minister Shinzo Abe to delay the meeting, Beijing became the EU’s first stop. And who would have anticipated that, on the eve of the EU – China summit, US President Donald Trump would designate the EU “a foe” and find excuses for China’s international trade practices? The aberrant remark – which only amplifies earlier statements – seems designed to bring Europe closer to China. Now the ball is in China’s court and the government should show that it is moving towards the final phase of negotiations in 2018. This would be a clear signal that China is willing to deliver on its promises for opening its markets. Should there be significant delays however, this will have negative consequences for both China and the EU and given the constructive July Summit, this will be a pity.
[i] EU, China seek closer ties as US turns against trade, Deutsche Welle, https://www.dw.com/en/eu-china-seek-closer-ties-as-us-turns-against-trade/a-44668306
[ii] Amid tensions with America, China is turning to Europe, The Economist, https://www.economist.com/china/2018/07/19/amid-tensions-with-america-china-is-turning-to-europe
[iii] EU and China find new rapport in Beijing, amid US trade disputes, Handelsblatt Global, https://global.handelsblatt.com/politics/eu-china-beijing-summit-us-trade-trump-945982
[iv] Donald Trump is pushing the EU and China closer together, Quartz Media, https://qz.com/1329107/donald-trump-is-pushing-the-eu-and-china-closer-together/
[v] Europe and China have an opportunity to turn words into action at summit, South China Morning Post, https://www.scmp.com/comment/insight-opinion/article/2155294/europe-and-china-have-opportunity-turn-words-action-summit
[vi] Godement, François, Big in Asia: Behind the rhetoric of EU relations with China and Japan, https://www.ecfr.eu/article/commentary_big_in_asia_behind_the_rhetoric_eu_relations_china_and_japan
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