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EU Vice President Valdis Dombrovskis is visiting China this week in a bid to calm tensions between the bloc and Beijing. According to one leading trade diplomacy expert, the high level talks could be "the first step towards a reset" in relations, but there still appears to be a long way to go.
The arrival of Dombrovskis - who is also the bloc's trade chief - comes at a time that trade ties between China and the EU have cooled and geopolitical tensions flared amid the Ukraine conflict and the push from Brussels to rely less on the world's second-largest economy. A sign of such friction, only last week, Brussels said it would be launching a probe into state-subsidized electric vehicle imports - with a heavy nod to China's growing dominance in the market.
Speaking at the annual Bund Summit conference in Shanghai, Dombrovskis reasserted that the bloc had no intention of decoupling from China, but was simply looking to protect itself and reduce its dependencies. However, he added that while the EU had posted record bilateral trade with China last year, it was "very unbalanced," citing a trade deficit of almost €400 billion ($426.08 billion) - an issue that would need to be addressed during the talks.
Discussing the potential impact of Dombrovskis's visit on China-EU relations, trade diplomacy expert Hosuk Lee-Makiyama told CGTN Europe that it is "probably premature to say that this is going to be a reset; it's probably more accurate to say this is the first step towards a reset."
European Commission Executive Vice President Valdis Dombrovskis speaks at the Bund Summit in Shanghai. /Jason Xue/Reuters
European Commission Executive Vice President Valdis Dombrovskis speaks at the Bund Summit in Shanghai. /Jason Xue/Reuters
After "many, many months of minor skirmishes" between Beijing and Brussels, the director of European Centre for International Political Economy, explained that many opportunities had been missed to work together more closely, particularly in the case of the Ukraine crisis. However, he stressed that such tensions were symptomatic of longer term structural issues between the two powers "that cannot be solved overnight... so we're probably not going to see breakthroughs on that trade deficit."
One of the sticking points, he said, had been the EU's demand for concrete agreements on Beijing further opening up access to businesses in China. However, with bilateral commerce between the two accounting for $900 billion, the fallout of failing to find common ground on such issues could hurt both economies, particularly the EU.
"Considering that we (Europe) don't have that much domestic growth to tap into... we are extremely export dependent and much more than China actually," said Lee-Makiyama. That means in order for the bloc to keep its domestic economy going, either it has to wait for a major market to open somewhere where there is growth, or rely on China's stable growth and gradual opening up.
"I think what we're seeing here is perhaps internal frustration, as well as external frustration with the pace in which China has slowed down in terms of opening up towards Europe, although some important concessions have been made," said Lee-Makiyama.
While EVs have been a major point of contention between the EU and China, the issue has been largely off the table during this round of talks, which has in turn allowed space for progress on other areas.
"If you look at the list of trade complaints that Europe has... you can almost say that they are expecting some gradual improvement across the board almost in every sector," said Lee-Makiyama. However, the principal sectors remain the EU's own strongest export interests; machinery, chemicals, motor vehicles and services.
"What is striking here is that these also happens to be areas where China is incredibly competitive," the trade expert added. "In other words, what used to be a target market is also a rival where China's value-added quality in these sectors is improving very, very rapidly."
The EU has blamed its trade deficit partly on Chinese restrictions on European companies. But as the trade policy expert points out, China's opening up to foreign business will not automatically offset any immediate imbalances. For example, while foreign companies have been allowed full ownership in China's domestic vehicle market in recent years, the margins for profits have shrunk because China's own companies have become increasingly competitive.
"These are things that are extremely difficult to manage. It's not all due to market restrictions or government restrictions," said Lee-Makiyama. "This is actually also a question about the nature of the relationship between the EU and China and how it has evolved as China is growing stronger and stronger."
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