The European Union’s goods trade deficit with China exceeds €1 billion a day. European Trade Commissioner Maros Sefcovic is travelling to Beijing for talks on trade and Chinese restrictions on exports of critical minerals, with Europe’s industrial capacity and control over key supplies at the centre of the relationship.
After three months of discussions, Sefcovic is due to meet Chinese Commerce Minister Wang Wentao on Thursday and Friday. The EU says the widening imbalance threatens industry and many thousands of jobs. Sefcovic wants “tangible results” by October and a commitment to present to EU leaders at their Brussels meeting on October 15-16.
Trade and industrial capacity
The EU wants China to give European companies greater access to its market. European trade officials say that alone won’t address the deficit. The European Commission is also urging China to cap some exports, though it’s unclear which imports Beijing might agree to curb.
Last week, the Commission’s chief trade enforcement officer said nearly a quarter of all imports were rising at a worrying rate. The official pointed to abnormal increases in machinery, textiles, basic metals and chemicals. These figures support the EU’s case that the imbalance reaches beyond the headline deficit.
Last month, European Commission President Ursula von der Leyen told the European Parliament that the imbalance had reached a tipping point. She said Europe would use every tool at its disposal to rebalance the relationship. The Commission is putting the response in the hands of EU institutions, while talks with Beijing will test what trade commitments the bloc can secure.
Cars and critical minerals
European officials are especially concerned about rising car imports from China. In the year to September, EU imports of plug-in hybrids rose 86%, while prices fell 20%. Imports of battery electric vehicles rose 40% over the same period.
China supplied more than half of the vehicles, despite EU tariffs on battery electric vehicles built there. The figures show those tariffs haven’t stopped Chinese-built vehicles from making up more than half of imports.
The talks also cover Chinese restrictions on exports of rare earths and other critical minerals. The EU has tied those restrictions to its wider effort to address the trade relationship. The published account offers no details on which export limits might change or what commitments China could make.
Brussels seeks a commitment
Trade relations with China top the agenda for the Brussels meeting of EU leaders on October 15-16. After three months of discussions on the deficit and export restrictions, Sefcovic is seeking a result from Beijing that he can present to the leaders.
In September, G20 finance leaders agreed to act against “non-market” distortions that worsen imbalances. China’s representatives didn’t take part in that agreement. Beijing has rejected the framing of economic imbalances and overcapacity, saying it amounts to protectionism designed to pressure and restrict China.
The positions remain far apart. The EU wants greater access for European companies and limits on some Chinese exports. The talks will determine whether the Commission can secure a commitment before EU leaders meet in Brussels.