EU trade commissioner to seek relief from export barriers during China visit

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EU trade commissioner Valdis Dombrovskis will arrive in China on Friday with a blunt message: buy more of our goods.

Dombrovskis is expected to convey a long list of commercial grievances as well as concern about a trade deficit that has ballooned to almost €400bn — which EU ambassador Jorge Toledo called “the highest in the history of mankind” at a panel discussion on Thursday — and a threat of tariffs on Chinese electric vehicles.

The EU commissioner will spend five days in China, where he will address a business forum in Shanghai and hold talks with senior officials in Beijing that are expected to be the most intensive in months.

The length of his trip “suggests both sides want to make sure some channels remain open after one of the most adversarial episodes in the EU-China relationship”, said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy, who pointed out that Dombrovskis would meet vice-premier He Lifeng, his ranking equivalent, rather than a more junior minister.

Among European businesses’ longstanding complaints are China’s refusal to approve medical devices and accept some food products from the bloc. Dombrovskis is also worried that Beijing is using security measures to crush competition and will question a new data law that requires companies to store data locally.

A report released this week by the EU Chamber of Commerce in China included more than 1,000 recommendations to overcome what Toledo called “market barriers”.

Europe and China needed to “sit down and have a grown up conversation about what is the common-sensical approach to de-risking”, said Jens Eskelund, president of the chamber.

China, in turn, will challenge the EU’s new carbon border tax and the announcement last week of an investigation into subsidies for electric vehicles, which could result in tariffs of 10-15 per cent. Brussels argues that its car industry is being harmed by artificially cheaper imports.

The EU’s recent decision to limit silicon chip technology exports has also stoked tensions.

“The concept of national security has been overstretched,” said Wu Hongbo, Beijing’s special representative on European affairs.

Brussels has been careful to strike a softer stance than the US, which is pursuing a more sweeping decoupling with China. Toledo emphasised on Thursday that Europe’s focus on de-risking — rather than decoupling — was driven by the coronavirus pandemic and the war in Ukraine, which disrupted the manufacturing and energy sectors.

China’s recent export controls on germanium and gallium, metals critical to chipmaking, “shocked” European businesses and underscored the need to re-examine supply chains, Toledo said.

China would prefer to keep business as usual — including its tactic of dividing the 27 member states, which have different levels of dependence on its economy, said analysts.

But the bloc’s stance had hardened, according to former EU trade commissioner Karel De Gucht, who held the post from 2010 to 2014. “What has changed is that the commission realises that we are really facing a strategic challenge.”

Toledo said the war in Ukraine was also “tainting” relations, with Europe wanting China to use its leverage to press Russia to withdraw its forces. “We are talking to our Chinese friends to make them understand that this for Europe, for the European Union, is existential,” he said.

China’s Wu countered that Beijing supported peace in Ukraine, but Moscow and Kyiv were not ready for negotiations. He also accused the west of applying a double standard to the conflict, citing the war in Iraq. 

“Do we forget the miserable life of the Iraqi people, when they were invaded by a permanent member of the Security Council without the approval of United Nations authority?” he said.

Both sides pointed to areas such as digitalisation, artificial intelligence and the green transition as areas for co-operation.

Sun Yongfu, former director-general of the Europe department in China’s commerce ministry, said Europe was overdoing talk of systemic rivalry. “De-risk doesn’t mean de-cooperating,” he said. “We need to find further ways and more areas of co-operation.”

He argued that the anti-subsidy probe had divided Europe, with some German groups opposed, including carmaker Mercedes-Benz. “I personally don’t think it is a very healthy signal.”

De Gucht concurred: “Germany certainly has second thoughts about this. And I’m pretty sure that as the case evolves, those second thoughts will come to the surface.”