EU trade envoy opens talks with Beijing, says China trade deficit ‘unsustainable’

EU trade representative Maros Sefcovic initiated discussions in Beijing over two days, aiming to prevent a trade conflict and address the unsustainable trade deficit between the European Union and China. Sefcovic emphasized the necessity of improving market access and enhancing economic security during his opening remarks, as reported by X. He acknowledged hearing directly from EU businesses in China, who expressed a unanimous desire for better access to the Chinese market while strengthening their economic security.

Last year, China exported about a billion euros more in goods and services to the EU compared to the other direction, as per European data.

Critics in Europe attribute this imbalance to Beijing's unfair trade practices, such as state subsidies and price dumping, which put European competitors, particularly in sectors like automobiles and chemicals, at a disadvantage. Nevertheless, Europe cannot afford to provoke China, as it could disrupt the supply of crucial materials for its industry, such as rare earth minerals, or impose barriers on European exports to China.

The two-day talks by Sefcovic in Beijing coincided with France and Germany, the bloc's two leading nations, signaling their intention to intensify efforts. According to a letter obtained by AFP, French President Emmanuel Macron and German Chancellor Friedrich Merz demanded a "credible instrument" capable of quickly reacting to any escalation by Beijing, although China was not specifically mentioned.

This proposed tool, to be discussed during the upcoming EU summit, would empower the European Commission to respond to trade aggression within days.

China promptly cautioned Paris and Berlin against adopting protectionist measures, urging them to avoid "wrong paths" and "suffer the consequences" themselves, according to a statement from China's commerce ministry. The Chinese foreign ministry expressed hope for collaboration between Beijing and Brussels, stating that adhering to openness, cooperation, and resolving economic and trade disputes through equal dialogue and consultation is in the common interests of both nations.

China's reliance on exports to offset its struggling domestic economy underscores the high stakes for President Xi Jinping. The EU parliament's trade committee chief, Bernd Lange, highlighted that the economic crisis in China presents the bloc with greater negotiating power. EU officials possess a well-equipped toolbox to counter unfair subsidies, dumping, discriminatory procurement, and economic coercion. Lange emphasized the need to consistently apply these instruments and enhance them when necessary.

EU and Chinese representatives have been negotiating since June, with Sefcovic expressing optimism earlier in the year about achieving tangible results by October. The negotiator prioritized tackling rising imports in strategically important sectors, boosting European exports to China, and enhancing access to vital raw materials. The EU also seeks clearer export-licensing arrangements for rare earths and other materials following China's introduction of restrictions last year.

While analysts remain cautious about the prospects of reaching a comprehensive agreement during the talks, they acknowledge the potential for progress on specific issues.