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EU and China find new rapport in Beijing, amid US trade disputes

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The enemy of my enemy is my friend. Source: DPA

Top European Union officials found Chinese leaders surprisingly accommodating in meetings about trade and investment, now that the two powers face a common nemesis in US President Donald Trump. At the previous such summit, last year, the two parties had so little to say about their relationship that they did not even issue a joint statement. Few expected that, this year, for the first time in three years, the EU and China would be able to issue a joint communiqué about what they agreed on.

But they did. European Council President Donald Tusk and Jean-Claude Juncker, the and President of the European Commission, signed six framework agreements covering everything from a joint investment project worth 500 million to cooperation on securities issues. Details and timing were largely missing from what were basically declarations of good intentions.

Nonetheless, Mr. Tusk and Mr. Juncker had high praise for their encounters with Premier Li Keqiang and other Chinese officials. “The architecture of the world is changing before our very eyes,” Mr. Tusk, former prime minister of Poland, said. Mr. Juncker also sounded euphoric. “I’ve always believed in the potential of European-Chinese partnership,” the former prime minister of Luxembourg tweeted.

China soft-pedals Silk Road initiative

Chinese officials refrained from bringing up any of those pesky issues that the EU doesn’t like. Officials have soft-pedaled the “Made in China 2025” industrial strategy recently. Likewise, they didn’t talk much about the 16+1 initiative with central and eastern European countries, although Mr. Li did meet with the 16 government heads earlier this month in the Bulgarian capital of Sofia. Nor has Beijing made a lot of noise lately about its “New Silk Road” project, linking China to Europe via land and sea.

Brussels has been critical of these last two initiatives because they have the potential to undermine EU jurisdiction over trade in favor of bilateral or regional accords. And of course, there are also the human rights violations that nobody wants to argue about during trade talks.

Mr. Li also played down China’s trade dispute with the United States, saying that Beijing would solve its bilateral problems at a bilateral level. Mr. Tusk emphasized that the two parties had no intention of forming a coalition against the United States, even though both are targets of punitive tariffs from the Trump administration. Together with the EU, China wants to uphold free trade and the multilateral system, Mr. Li said.

17 p07 Chinas foreign trade-01

It was the 20th annual session of what is known as the EU-China summit, although neither Mr. Tusk nor Mr. Juncker are heads of state or government. Mr. Tusk is the permanent chair of the council that brings together Europe’s national leaders, who hold the ultimate power in the EU. Mr. Juncker heads the vast Brussels bureaucracy, which formulates a panoply of rules, directives and guidelines that cover virtually every aspect of economic life in the EU. The EU, however, is responsible for trade and investment, the focus of these meetings

Both sides reported “substantial progress” on an investment treaty that would open up their domestic markets to foreign investment. Timing again was vague, and conclusive agreements certainly won’t come this year, one EU diplomat said. Mr. Li pointed to the planned €10 billion chemical complex in China, in which the German firm BASF will retain total control, as a sign of China liberalizing its market. And all indications suggest that BMW will soon up its stake in its Chinese joint venture to 75 percent.

The two parties are also close to agreeing on the labeling of agricultural products, in the hopes of increasing the relatively minimal exchanges of those products. At the moment only 8 percent of EU exports to China are agricultural products and 5 percent of Chinese exports to the EU.

The two parties also agreed to push for reform of the World Trade Organization, especially with regard to industrial subsidies, intellectual property and forced transfer of technology, as well as more efficient dispute settlement. The EU doesn’t believe current WTO machinery provides enough protection from Chinese trade practices.

The Trump administration has imposed punitive tariffs on both China and the EU, claiming current levies are unfair to the US and contribute to its chronic trade deficit. Other points of agreement between Beijing and Brussels are the Iran nuclear accord, which Mr. Trump recently abandoned but which both of them still support, and the Paris accord on global warming, which the US also pulled out of, but China and EU still respect.

Ruth Berschens is Brussels bureau chief for Handelsblatt. Sha Hua is Beijing correspondent. Darrell Delamaide adapted this article into English for Handelsblatt Global. To contact the authors: berschens@handelsblatt.com and sha@handeslblatt.com.

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