As China and the European Union began a fresh round of trade talks in Beijing on Thursday, observers on both sides appeared to agree on one thing: a big breakthrough was unlikely.
Chinese firms based in Europe said they hoped the talks could achieve some “limited progress” to help stabilise the trade relationship, while European analysts remained cautious about the potential outcome.
“They’re bound to get some results,” said a Chinese source with knowledge of the talks, adding that EU Trade Commissioner Maros Sefcovic “will not go home empty-handed”.
The China Chamber of Commerce to the EU called on both sides to make full use of the Trade and Investment Consultations (TIC) mechanism to manage differences, push for solutions and send clearer signals to businesses.
“Even limited progress that improves predictability and reduces the risk of further escalation would be meaningful for companies in both Europe and China,” said an executive at a Chinese renewable energy firm in Europe.
Chinese firms in the automotive, medical equipment and chemical products industries are bracing for more trade frictions in the months ahead, according to another Chinese executive based on the continent.
Yuyuan Tantian, a social media account affiliated with state broadcaster China Central Television, published an article on Wednesday urging both sides to “maintain strategic patience” and said current negotiations enabled China and the EU to “verify trade flows in sectors such as plug-in hybrid vehicles and chemicals together through a joint monitoring mechanism”.
Many on the European side agreed that it was in no one’s interest for talks to break down, but stressed that Sefcovic would be under pressure to bring back significant results to satisfy policymakers in Europe.
With concerns rising that a “China shock 2.0” could decimate its industrial base, frustration has grown in Europe over a perceived lack of progress in the EU’s trade discussions with China.
On Monday, France and Germany proposed a “rapid response” trade tool giving the European Commission the power to swiftly cut a third country deemed a threat – such as China – out of its market.
While China-EU trade relations are complex and issues take time to resolve, it was important for China to show some forward movement, according to Ignacio Garcia Bercero, a senior fellow at Bruegel and former director at the European Commission’s trade department.
The best-case scenario would be for China to recognise that the EU needs to take action to protect some of its sectors, Garcia Bercero said.
“China should understand that normal actions under World Trade Organization rules are not escalations,” Garcia Bercero said, adding that both sides should not let policy actions interrupt dialogue.
Beijing may offer small compromises to calm certain member states and turn them against the Franco-German “rapid response” tool, but such measures would not be enough to solve the wider imbalances in the trade relationship, according to Marc Julienne, director of the Centre for Asian Studies at the French Institute of International Relations.
A source from France’s Elysee Palace said the proposed trade tool would enable the EU to take necessary action to protect businesses while trade talks with third countries progress, as Europe could not afford to wait “for months” on the outcomes of dialogues while certain sectors faced pressure from unfair competition.
“China and Europe are likely to head towards a more intensified trade tit-for-tat situation,” Julienne said, cautioning that for now neither side wanted a trade war. -- SOUTH CHINA MORNING POST
