| |
EU Sends Envoy to Beijing 10/08 06:27
The European Union is bracing for a confrontation with China as a trade
deficit exceeding $1 billion a day heightens anxiety over potential job losses
and pushes the bloc's political leaders to take a more aggressive approach
toward its second-largest trading partner.
BRUSSELS (AP) -- The European Union is bracing for a confrontation with
China as a trade deficit exceeding $1 billion a day heightens anxiety over
potential job losses and pushes the bloc's political leaders to take a more
aggressive approach toward its second-largest trading partner.
The European Commission's top trade envoy, Maro efovi, will be in
Beijing Thursday for a two-day meeting with Chinese Commerce Minister Wang
Wentao. The goal is narrowing the EU's 360-billion-euro ($410 billion) trade
deficit with China. Earlier this year, he gave Beijing a deadline of October to
provide meaningful results in doing so.
Politicians and economists across the 27-nation bloc consider China's
massive subsidies and exports a major threat to core industrial sectors from
steel foundries to car factories. China diverted many of its exports to the EU
and other markets after the U.S. raised tariffs.
In a debate Tuesday in European Parliament in Strasbourg, lawmakers
overwhelmingly expressed anxiety alongside defiance over trade with China. On
Wednesday, they voted 454 to 86 on a resolution to toughen up on China that
centered on a call for "economic reciprocity and a proportionate EU response if
China does not open its markets."
Ahead of the vote, Hilde Vautmans, the Belgian lawmaker who led the
resolution, said that "Europe has economic power, it's time we used it."
EU options range from tariffs to a "trade bazooka"
Despite the seeming European unity this week, it remains unclear what the EU
can or is willing to do. It has already rolled out trade measures against
Chinese steel imports and e-commerce small parcels.
France's High Commission for Strategy and Planning in February called for
swift action, like 30% tariffs on many of China's exports, and a devaluation of
the euro against the Chinese currency. Sales of German autos are plummeting in
China, but China is also poised to gobble up market share in Europe by
undercutting European automakers on price thanks to heavy state subsidies.
There have already been mass layoffs at major manufacturers like Volkswagen.
A letter by France and Germany, a copy of which was seen by The Associated
Press, called for a sweeping rethink of the EU's China policy. Among other
actions, it proposed making it easier for the European Commission to use the
bloc's so-called "trade bazooka," the Anti-Coercion Instrument. This is a
never-used-before raft of measures for blocking or restricting trade and
investment from countries found to be putting undue pressure on EU member
nations or corporations.
Yet not all EU nations agree on such tough measures. Spain, the eurozone's
fourth-largest economy, has been less adversarial toward China in recent years.
Prime Minister Pedro Sanchez has visited Beijing four times in three years.
Far-right and left-wing lawmakers from Ireland to Bulgaria formed an unusual
coalition on Wednesday to vote against resolution calling for tougher China
policies.
The European Policy Centre in Brussels said in June that European battery
producers, solar panels, steel, electric vehicles, chemicals and machinery are
already hemorrhaging jobs and capacity and called for a trade investigative
body modelled on Section 301 of the U.S. Trade Act.
European Commission President Ursula von der Leyen called the phenomenon
another " China shock " for Europe, similar to what happened in the U.S. in the
early 2000s when hundreds of thousands of factory jobs in the American
heartland were wiped out.
The EU's ailing economy requires both a domestic overhaul and a more
aggressive foreign trade policy, especially with China, said Tim Rhlig, a
China analyst at the European Union Institute for Security Studies, the bloc's
internal think tank.
Rhlig also said that European businesses and political leadership bear some
blame.
"It's clear that just protecting yourself from China is not the future,"
Rhlig said. "But to have a chance of making yourself ready for future
technologies and to remain competitive in the coming 15-20 years, you have to
protect yourself."
It is impossible to disengage completely with China as the EU did with
Russia following its invasion of Ukraine, Rhlig said, but there is robust
momentum now to reset trade relations with Beijing.
"Where do we make ourselves independent or at least more diverse? And where
do we still work with the Chinese?" Rhlig asked.
On Wednesday, U.S. Secretary of State Marco Rubio during his Greece visit
called for Europe to strengthen its alliance with the U.S. as he urged Europe
to "awaken from its long slumber."
Rubio said that Europe and the U.S. are at "a crossroads" where actions
taken now "will determine whether the West maintains its place at the head of
the world or resigns itself to a future of atrophy and servitude and decline.
We will either choose to act now or lose the choice to act at all."
China is ready for a long trade dispute
This week in Beijing, when asked about the letter penned by France and
Germany, a spokesperson at China's Ministry of Commerce said that the countries
should refrain from encouraging the EU to resort to protectionist measures.
"Protectionism cannot enhance competitiveness, and decoupling or cutting off
supply chains will only harm others without benefiting oneself," the commerce
ministry said in a statement.
China is the EU's second-largest goods trading partner after the U.S.,
according to European Commission data. Chinese exports to the EU rose 15.3% in
the first eight months of this year, according to China's customs agency, while
its imports from the EU rose 6.2%.
"The EU does not have the capacity to wage a trade war against China," read
an editorial last month in China's state-run Global Times newspaper. "If it is
truly determined to do so, then let it try."
China's exports to Europe, as well as Southeast Asia, Latin America and
Africa, expanded after U.S. tariffs went into effect last year, but it still
booked a $1.2 trillion trade surplus globally in 2025. So far, China's export
machine has remained remarkably resilient despite U.S. tariffs and other trade
restrictions, said Max Zenglein, Asia Pacific senior economist at The
Conference Board.
This past weekend, ahead of the meeting between efovi and Wang, China
launched an anti-dumping probe on EU exports of p-nitrotoluene, which is used
in dyes and pharmaceuticals. The probe was initiated after Beijing warned last
month that it would take retaliatory actions if the EU instituted tougher
protectionist trade measures.
"China has been battle-tested by successive rounds of external pressure and,
so far, has largely stared down attempts to force a change in course," said
Zenglein.
China's economy has been largely driven by exports as domestic demand
remains sluggish. The EU imports sizable amounts of Chinese lithium-ion
batteries and hybrid electric vehicles, and Chinese carmakers are also
expanding production capacity in Europe.
While China's trade surplus has intensified concerns among its major trading
partners, trade ties between the U.S. and China appear relatively stable
following a summit between Chinese President Xi Jinping and President Donald
Trump in Washington, wrote Bank of America economists, turning the attention to
China-EU relations.
When it comes to negotiations with the EU, Chinese investment in Europe is
likely to be among Beijing's bargaining chips, Zenglein added, particularly as
EU member states compete to attract capital, jobs, and new manufacturing
projects.
|
|
