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New Heights
China and the EU choose closer cooperation and free trade values
By Wen Qing | NO.30 JULY 26, 2018

Chinese President Xi Jinping meets with European Council President Donald Tusk (left) and European Commission President Jean-Claude Juncker, who were in Beijing to attend the 20th China-EU Leaders’ Meeting on July 16 (XINHUA)

Leaders of the European Union (EU) must have been shocked to hear that they topped U.S. President Donald Trump's hit list after he was asked during a CBS News interview to name his "biggest foe globally right now." Following Trump's recent trip to Europe, where he suggested British Prime Minister Theresa May sue the EU rather than go into negotiations with it, the naming of the EU as his number one foe should be another wake-up call for the once close ally. This comes on the heels of U.S.-imposed aluminum and steel tariffs earlier this year.

The question now is: After a series of body blows, is it time for the EU to turn away from the United States?

While it may be too early to give an affirmative answer, there is a mounting need to defend multilateralism given Trump's moves. At the 20th China-EU Leaders' Meeting in Beijing on July 16, co-chaired by Chinese Premier Li Keqiang, European Council President Donald Tusk and European Commission President Jean-Claude Juncker, both sides demonstrated their determination to safeguard the rule-based international order and support free trade.

Closer partnership

As the world is clouded by U.S. unilateralism and trade protectionism, China and the EU are taking concrete measures to fulfill their commitment to free trade. During the meeting, Premier Li stressed that China's door would only open wider to the world, noting the fact that the Chinese Government issued a new foreign investment negative list recently and looks to further ease market access. He encouraged the EU to seize the opportunity to expand investment in and trade with China, ease the limitations on hi-tech exports to China and create a fair and transparent environment for Chinese investment in Europe.

China has shown great resolve in further opening up and will gradually ease the cap on foreign ownership in joint venture companies in various areas, according to Feng Zhongping, Vice President of the China Institutes of Contemporary International Relations. China's further opening-up measures will provide fresh opportunities for European enterprises by giving them more access to China's giant market. Juncker pointed out that China knows how to open up its economy, noting China's recent commitment to improving market access.

For example, media reports say German automobile giant BMW will increase its stake in BMW Brilliance Automotive, a joint venture with Brilliance China Automotive Holdings, to at least 75 percent. This will make it the first international automaker to hold a majority stake in a joint venture in China.

Moreover, Germany's BASF, the largest global chemical producer, is set to build China's first wholly foreign-owned chemical complex with an investment of $10 billion.

China and the EU also exchanged market access offers in ongoing investment agreement negotiations and promised to make the talks a top priority. This is an important step to finally concluding the negotiations for the Bilateral Investment Treaty (BIT). According to Premier Li, countries need to not only talk, but to take action to counter unilateralism and trade protectionism, and the progress made by China and the EU in finalizing BIT negotiations is a good example.

China-EU investment negotiations started in 2014, and include setting up pre-establishment national treatment and a negative list, the opening up of high-end service industries and environmental protection.

Concluding the BIT negotiations would be significant for both sides, as it could provide legal guidance, better ensure the safety of mutual investments, and establish an open, predictable, fair and transparent business environment for investors, Feng told Beijing Review.

The EU has been China's largest trade partner for 14 years and in 2017 bilateral trade reached $616.9 billion. China is the second largest exporting market and the largest importing country for the EU. However, the bilateral investment level is still somewhat low. EU investment in China only accounts for 4 percent of its overseas investment, while Chinese investment in the EU only accounts for 2 percent of total foreign investment in the region.

The fundamental aim of BIT is to reduce restrictions, with both sides wanting to reach a high-quality treaty. Feng believes significant progress will be achieved soon in negotiations.

A joint statement released after the leader's meeting included solutions to certain differences and a clear roadmap for future cooperation in economy and trade.

China and the EU will also foster synergy between the Belt and Road Initiative and the Trans-European Transport Network. In Feng's opinion, the EU needs to alter its attitude toward the Belt and Road Initiative since it could bring opportunities for all participating parties.

This year marks the 15th anniversary of the forging of the Sino-EU comprehensive strategic partnership. Compared to the China-EU summits in 2016 and 2017, in which no joint statements were released, this year's meeting yielded impressive results and made important progress in bilateral economic ties, said Cui Hongjian, Director of the Department for European Studies at the China Institute of International Studies.

Against unilateralism

President Xi Jinping, taking the opportunity to meet with Tusk and Juncker while they were in Beijing, pledged more reform and opening-up outcomes. The Chinese head of state and the EU leaders reiterated their common ground for defending multilateralism and free trade. Xi said China and the EU should follow the trend of world multipolarism and economic globalization; join hands with each other to safeguard multilateralism, a rules-based system of free trade and an open world economy; and push ahead with trade and investment liberalization and facilitation.

Tusk and Juncker, for their part, said that the EU was willing to expand cooperation with China and step up communication and coordination with China in international affairs.

China and the EU are both victims of the U.S.-initiated trade war evidenced by the 25-percent duty on steel and 10-percent duty on aluminum slapped on EU companies on May 31 and the 25-percent tariffs imposed on Chinese goods worth $34 billion on July 6. Both China and the EU are determined to fight back. The EU responded with retaliatory tariffs on $3.4 billion of U.S. products on June 22, while China announced a similar 25-percent tariff on U.S. imports worth $34 billion on July 6. Both also lodged complaints against U.S. trade protectionism with the World Trade Organization (WTO).

Trade disputes among countries are common and the question of how to deal with them is critical. Cui said there are similarities between the problems of China and the EU and those facing China and United States, such as trade imbalances and intellectual property rights protection. China and the EU advocate solving such disputes through negotiations under the framework of the WTO, instead of taking unilateral action like the United States has done. During the summit, Premier Li said China wants to seek more balanced trade with the EU, citing a wide range of areas where China and the EU can cooperate, demonstrating China's active role in solving these issues.

Kerry Brown, Director of the Lau China Institute at King's College London, sees the opportunity for more cooperation between China and the EU amid the U.S. trade war since the EU shares the same views as China on protecting the global free trade system. "We have an opportunity to rethink the commitment to the global free trade system. China is in alliance with Europeans on this, which is really a kind of fresh opportunity," he said.

Moreover, China and the EU reached agreements on setting up a working group to overhaul the WTO, maintaining the Iran nuclear deal and committing to abide by the Paris climate change pact. These agreements were in sharp contrast to U.S. unilateralism and showed the commitment of both China and the EU to their global responsibility as well as to multilateralism, Feng said.

Copyedited by Rebeca Toledo

Comments to wenqing@bjreview.com

 

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