EU-China trade: closer ties as US-China trade battle brews

EU/China Summit, 12-13/07/2016
Date: 12/07/2016. Location: Beijing – Diaoyutai State Guesthouse. © European Union , 2016 Source: EC – Audiovisual Service. Photo: Olli Geibel

The U.S. Commerce Department announced last Monday that it prohibited American companies from selling components to ZTE, one of the biggest tech companies in China, for seven years. The Chinese side responded to this action by introducing a huge import charge on US shipments of sorghum mentioning that it will defend multilateralism and free trade in case the U.S stance continues.

Europe though stands in the middle of that battle while the U.S. is not going to impose tariffs on European steel and aluminium imports at least till May 1 and China attempts to improve its trade ties with the EU bloc. President Xi Jinping delivered a speech at the opening ceremony of the Boao Forum for Asia Annual Conference 2018 where it was stated that import tariffs for vehicles and other products will be reduced this year and new policies will be adopted aiming at the liberalisation and improvement of the investment environment.

U.S.-China trade war

The U.S. imposed a 25% tariff on Chinese steel and aluminium imports last month. U.S. president Donald Trump mentioned that the imposed 60 billion dollars levies on Chinese goods will make America a “stronger and richer nation” to address the 375 billion dollars trade deficit with China. The latter responded to these taxes by imposing tariffs on U.S. imports worth around 3 billion dollars.

The battle continued when the U.S. Department of Commerce banned last Monday American firms from selling goods to ZTE for seven years. ZTE was fined back in 2017 for illegally exporting US technology to Iran and North Korea and the ban came as ZTE didn’t manage to properly reprimand the employees involved. It should also be mentioned that ZTE’s shares were suspended from trading in Hong Kong yesterday following the U.S. announcement. Foreign Ministry spokesperson Hua Chunying replied to this action against the Chinese tech company stating that “if the US continues to act recklessly … we stand ready to show our sword, and fight to win this battle to defend multilateralism and free trade”.

However, apart from the announcement, China is also going to impose a huge import barrier on sorghum today. In detail, the Chinese customs officers are about to charge a levy of 178.6% on U.S. sorghum following an investigation which found the U.S. shipments unfairly subsidised and damaging Chinese producers. Tim Lust, chief executive of the National Sorghum Producers, mentioned on the issue that: “We didn’t ask for this fight, but now we’re on the front lines of it. Farmers are really stuck in the middle of … this much larger fight [with China].”

China’s targets

Meanwhile, the Boao Forum for Asia Annual Conference 2018 took place from April 8 to 11 in Boao, a town in South China’s island province of Hainan, under the theme “An Open and Innovative Asia for a World of Greater Prosperity.” President Xi Jinping delivered a keynote speech aiming at tariffs and imports, intellectual property rights protection, investment environment, market access, Belt and Road Initiative and Chinese economy.

First of all, president Xi announced that China will lower the vehicle import tariffs to a great extent this year in order to increase imports. More specifically, Xi Jinping said: “We will take the initiative to expand imports. China does not seek trade surplus; we have a genuine desire to increase imports and achieve greater balance of international payments under the current account”.

Secondly, it was mentioned that intellectual property rights protection will be strengthened. Particularly, president Xi stated: “Stronger IPR protection is the requirement of foreign enterprises, and even more so of Chinese enterprises. We encourage normal technological exchanges and cooperation between Chinese and foreign enterprises, and protect the lawful IPR owned by foreign enterprises in China.”

Mr Xi Jinping highlighted that China will enhance the investment environment for foreign investors and take landmark measures to expand its market access. Furthermore, the president of the People’s Republic of China said that the Belt and Road Initiative can benefit everybody through international cooperation and not only China. Another topic that was targeted was China’s GDP growth which has a 40-year average rate of 9,5% in comparable prices and Chinese people are living a more prosperous life as poverty has been relieved according to Xi Jinping.

Intense EU-China trade meetings

At the same time, the Chinese trade representatives and officials have held several meetings with European leaders and ambassadors to improve trade relations and resist to the protectionist measures that the U.S. is imposing.

On April 8, President Xi Jinping met with President Alexander Van der Bellen of Austria at the Great Hall of the People in Beijing. Both agreed to create a China-Austria friendly strategic partnership improving the relationship between the two nations. Xi Jinping said that “China and Austria enjoy high economic complementarities and great potential for cooperation” and Alexander Van der Bellen mentioned that Austria intends to play a positive role in enhancing the EU-China cooperation as will take over the rotating presidency of the EU in July.

Last Thursday, Chinese Premier Li Keqiang welcomed Prime Minister Mark Rutte of the Netherlands at the Great Hall of the People. During that meeting, Mark Rutte stated that the Netherlands is ready to work with China against protectionism and protect the trade system with the WTO as its core. What is more, China’s international trade representative Fu Ziying held meetings with the ambassadors from France, Germany, the United Kingdom, Spain, Italy, and the European Union last week to request their support regarding the recent U.S. protectionist measures imposed to the Chinese imports according to Reuters.

Therefore, there is an intense mobility between China and EU in order to react to the U.S. import tariffs at the moment when uncertainty reigns in the minds of European officials as well.

All in all, the trade war between the U.S. and the rest of the world seems to have just kicked-off and it remains to be seen now what will be the stance of the Old Continent if the U.S. decides to impose tariffs on EU imports.