Unveiling the EU-China Trade Ploy: New Era of Cooperation or Cause for Concern?

By Lily Hackett September 26, 2023

In attempts to quell escalating tensions, China and the European Union are working together to address trade imbalances and navigational geopolitical issues.

China and the European Union are finally stepping up to the pressing issue of trade imbalances, tension over geopolitical issues, and the need for transparency. They have recently agreed to share information regarding export controls. This decision came as Europe’s top trade official called for better access for EU exporters to the Chinese market, which is the world's second-largest.

"Our relationship needs rebalancing and must be mutually beneficial, based on fairness, predictability and reciprocity. We are on the path of addressing some market access issues and I am pleased about it," stated Valdis Dombrovskis, European trade chief.

Plans to increase transparency within the raw material supply chains were also discussed by the two economic powers, as per the European Commission's statement released Monday. This discussion happened during Dombrovskis's visit to Beijing, where he had talks with Chinese Vice Premier He Lifeng. Their agenda included the circulation of agricultural products and alcoholic beverages, and a mutual agreement for approving a "backlog of applications for licenses of infant formula."

At a press conference following the meeting, He expressed China's readiness to buy more products from the EU, and expressed hope that Europe would ease restrictions on exporting high-tech products to China. However, despite these cordial discussions, the relationship between the EU and China has seen turbulence, fueled largely by the EU’s investigation into China's support for their electric vehicle industry. This investigation caused a backlash from China's commerce ministry, which labeled it as “blatantly protectionist”.

Earlier on Monday, Dombrovskis expressed the need for the EU to take a more assertive approach with China due to its trade practices. “We stand at a crossroads between pursuing mutually beneficial relations based on open, fair trade and investment, or taking a path that could divide us,” he shared at a lecture in Tsinghua University.

As per records, last year, the trade deficit of the bloc with China ballooned to a staggering 396 billion euros ($421 billion), termed as “the highest in history” by Jorge Toledo, the EU ambassador to China. Half of this deficit was due to vehicles and machinery, and the rest resulted from other manufactured goods, chemicals, and energy.

Heightened imports of Chinese vehicles have put European car manufacturers on high alert causing further strain. Moreover, the tech supply chains have also been impacted as China imposed export curbs on two semiconductor materials, hampering Europe and US's access to advanced chipmaking equipment.

Furthermore, Dombrovskis noted that European businesses are wary of China's operating environment becoming increasingly political and unpredictable. China's stance on the Ukraine war has negatively influenced its image not just amongst European consumers but also among businesses seeking to invest. “China’s stance is hard for us to comprehend,” stated Dombrovskis.

The trade between China and Russia has witnessed a significant rise since Russia’s invasion of Ukraine in 2022. Despite the increasing reliance of Moscow on Beijing, China maintains that it is neutral and desires peace in Ukraine. Laura He contributed to this report.

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