Trade war: EU-China Summit

Chinese Premier Li Keqiang hosted European Council president Donald Tusk and European Commission president Jean-Claude Juncker in Beijing on July 16th, for the annual EU-China Summit.  

Background

Sino–European relations were established in 1975. According to the European External Action Service, the EU-China relations aim for cooperation in the areas of "peace, prosperity, sustainable development and people-to-people exchanges." The EU is China's largest trading partner, and China is the EU's second largest trade partner after the United States.

In the jointly adopted EU-China 2020 Strategic Agenda for Cooperation, the EU reaffirmed its respect for China's sovereignty and territorial integrity, while China reaffirmed its support to EU integration. An annual EU-China Summit is being held each year to discuss political and economic relations as well as global and regional issues.

Trump’s protectionist trade policy has affected the EU and China. After he imposed 25% tariffs on steel and 10% on aluminum with the EU, Canada, and Mexico, the EU responded by imposing its own import duties of 25% on a range of US goods.

Trump’s decisions raised concerns for a full-blown trade war by targeting Chinese imports. The proposed new round of US tariffs mark a sharp escalation in a trade war between the world's two largest economies. They began levying 25% tariffs on $34 billion worth of goods against the other on July 6, with tariffs on another $16 billion in goods, on the cards. China on 11th July  vowed to take “countermeasures” after the United States announced 10% tariffs on an extra US$200 billion worth of Chinese imports.

Analysis

The annual EU-China summit in Beijing on Monday opened against the backdrop of the growing China-US economic confrontation and wider global trade discord. The meeting is expected to produce a modest communique affirming the commitment of both sides to the multilateral trading system. Leaders failed to find sufficient consensus for such a joint statement after meetings in 2016 and 2017.

The European Union on Monday called on the United States, China and Russia to work together to avoid trade “conflict and chaos” to prevent it spiralling into violent confrontation.“It is the common duty of Europe and China, but also America and Russia, not to destroy (the global trade order) but to improve it, not to start trade wars which turned into hot conflicts so often in our history,” EU Council President Donald Tusk said in Beijing.

This year’s summit comes at a time of strategic importance for both EU and China.  Trump’s visit to Helsinki to hold talks with Putin and the ongoing tit-for-tat tariff war escalations between China and US, make this a crucial summit. European envoys have sensed a greater urgency from China since last year to find like-minded countries willing to stand up against Trump's “America First” policies.

China's ambassador to the European Union, Zhang Ming, said that the focus of the meeting would be on how China-EU relations could become a "standard of stability" amid the "din of unilateralism and protectionism." China and Europe are "two major forces of stability and responsibility" that support inclusive globalisation, Zhang said.

However, the EU has largely rebuffed efforts by China to pressure it into taking a strong stance against Trump. There is deep scepticism in the EU about China's actual commitment to liberalizing its market. There is also concern that China seeks to divide the bloc with its economic influence in Eastern Europe. Nonetheless, European officials suggest that Trump, who has also targeted Europe with tariffs, has created a window of opportunity to show that EU-China relations can be a bulwark for global trade.

During the talks, China and the EU are also expected to set up a working group on reforming the WTO. The world needed trade reform, rather than confrontation, Donald Tusk said. “This is why I am calling on our Chinese hosts, and also on Presidents Trump and Putin, to jointly start this process from a thorough reform of the WTO,” he added.

Following the summit, European Council President Donald Tusk, European Commission President Jean-Claude Juncker and Chinese Premier Li Keqiang, agreed to the joint statement and the annex on climate change and clean energy. They also affirmed their commitment to preserving the Iran nuclear deal. Both sides welcomed the holding of their Human Rights Dialogue in China in July.

Assessment

Our assessment is that EU-China relations have a promising future, as they agreed to a joint statement at the Summit. We feel that Trump’s protectionist policy has been instrumental in paving the path for a stronger Sino-EU relationship. We believe that the summit’s efforts to reform world trade is a welcome change in the ongoing trade conflict.