trade talk

China, Say Cheese, Please

Brie de Meaux, a French Cheese made from Cow’s Milk
Food fight brewing over the stinky stuff? Source: Picture Alliance.

In China, cheese is popular among foodies but has never been a mass phenomenon. But now Beijing has banned certain imports, it won’t be possible for gourmets to buy European soft cheeses like brie or gorgonzola, officially because of bacteria.

The decision is the latest sign of a trade dispute brewing between Europe and China. Now, Beijing is considering demanding a certificate of safe use for imported items like noodles, cookies and candy, while the EU wants to impose tighter restrictions on Chinese investors.

This is dangerous because neither the EU nor China can afford a trade war. Both sides should exercise restraint – and while this would be in their own interest, tensions do not appear to be easing. In a speech to the European Parliament on Wednesday, European Commission President Jean-Claude Juncker plans to lay out the details of a new plan to subject Chinese investments in Europe to greater scrutiny. Germany, France and Italy had proposed a debate on the issue.

Even before Mr. Juncker’s speech, it is clear that most European Union countries will not support such scrutiny on an EU-wide basis. Countries in Eastern Europe, in particular, do not want to jeopardize their relationship with Beijing by taking such a step. Brussels will likely assign responsibility for examining investments from the Far East to the member states, making the step more symbolic than effective.

The EU doesn’t stand a chance of competing with China over who can impose the highest trade barriers.

Beijing’s decision-makers know this, but the symbolism is disastrous. For years, the European Union has touted itself as the world’s most open trading bloc. EU leaders stress that Chinese and other investors are more welcome than anyplace else in the world. In return, they have also demanded more openness from Beijing. But China is already shooting back, its media is accusing Europe of protectionism, and Chinese negotiators are downplaying European demands for greater market liberalization in their country by citing the new initiatives in Europe.

Brussels should never have begun fencing itself off from China, even to a small degree. The EU doesn’t stand a chance of competing with China over who can impose the highest trade barriers. And this shouldn’t even be in Europe’s interest. By imposing new controls, the European Union is losing its trump card: total openness.

The EU could use this trump card to pressure China to provide greater market access for European companies, for which there is plenty of justification. Chinese conglomerates like Fosun and HNA have invested in or completely taken over European businesses, but the same move in China is all but impossible for European companies. Automobile manufacturer Volvo is in Chinese hands, while European automakers are still being forced to enter into joint ventures with Chinese companies. Beijing also recently imposed further restrictions on European law firms operating in China. And Beijing still maintains a list of sectors in which foreign companies are not even allowed to invest.

This list is supposed to be history; Brussels and Beijing have spent the last 14 rounds of negotiations talking about a mutual investment treaty. The EU focused on making market access its top priority. But when the negotiators start the next talks in Beijing in October, they will still be focusing on ordinary issues, while the negotiations over equal access for European companies in China are not yet truly on the agenda.

They forget that there are much better arguments than sealing off their markets.

This is a serious problem. Some of the European negotiators hope that the new scrutiny will provide them with the negotiating clout they need to force Beijing to make concessions. But they forget that there better arguments than just sealing off their markets.

China’s rival Japan is on the verge of signing a groundbreaking free-trade agreement with the European Union, which could take effect as early as next year. The decision-makers in Brussels should use this development as a bargaining tool in Beijing. The Japan deal might create the necessary pressure to make sure talks with China on the investment agreement finally enter the crucial phase.

The EU is open and must always remain open. This can be the only basis for future trade policy. Isolation, on the other hand, cannot become a trademark of European economic policy experts.

 

The author is our China correspondent. To reach the author: scheuer@handelsblatt.com

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