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I would like to use this landmark occasion to take stock of our legacy in these extraordinary times.
Every mandate has to deal with unforeseen events. But I think you will agree with me that the past five years have been especially tumultuous.
On the heels of the Covid pandemic came a cascade of further crises, shocks and profound geopolitical disruptions. The tectonic plates have shifted dramatically over the past years, not least with the US and China’s competition intensifying. But not even in our wildest of dreams would most of us have foreseen Russia’s horrific and illegal war of aggression against a sovereign state, Ukraine.
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Let me now turn to the East. Our relations with China remain challenging and ever more complex. China is second biggest trading partner for the EU. We value this partnership. There is no plan to cut our political, economic or societal ties.
Yet, we need to be honest and admit that our relationship is unbalanced. Trade data shows that with more than 20% of our goods imports, China is our largest supplier but it is only our third-largest customer, making up less than 9% of our exports. Last year, our trade deficit with China amounted to over 290 billion Euro. It simply attests to the fact that the EU market is much more open to China than the other way round. We observe industrial policies including harmful subsidies supporting the manufacturing sector, preferential SOE policies and other economic distortions that lead to an unlevel playing field between Chinese and European companies.
Going forward, our successors will have to stay on watch over possible overcapacities in clean-tech and digital sectors, in addition to existing concerns in traditional sectors. While applauding China’s technological progress, we will have to make sure that the competition in the Single Market and globally is fair.
The relationship between EU and China has been negatively affected by the stance that China has chosen to take on Russia’s illegal and unprovoked war against Ukraine. Time and time again, I have tried to impress on my Chinese counterparts here and in Beijing that the damage that the war has brought to China’s reputation in Europe. The pain that Europeans feel is real. The future of the EU – China relationship is linked to the course of war in Ukraine, and to the role that China will chose to play.
In parallel, we see China growing increasingly assertive and challenging the current rules-based system, also by means of economic coercion. It has incentivised the EU to carefully look at risks that come with this important relationship. We have started to de-risk our overdependencies, especially in the critical sectors. This work will continue into the next mandate. I mentioned earlier that we now have 184 trade defence measures in place. Almost two thirds of which concern imports from China. We will continue to use our trade defence tools to keep watch.
Having said that, I believe the EU has interest in intensifying engagement with China, also to work out differences and avoid unnecessary escalation. Large economies such as ours have a strong interest in cooperating, so as to minimise the risk of fragmentation of global markets. This would come at a high cost to our own economic growth, but also for developing countries.
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Source: European Commission
Speaker: Valdis Dombrovskis, Executive Vice-President and European Commissioner for Trade
Format: Speech
China Policy Research 