MNI: EU To Keep China Option In Reserve As Seeks US Deal

The European Union will keep the possibility of further opening up to China in reserve as it tries to deescalate its trade conflict with the U.S. over the next three months, though Brussels is unlikely to stop individual EU member states from seeking deals with the Asian giant, officials in Brussels told MNI.

EU officials are wary of angering Washington, which hopes to enlist European support for a joint approach to China to demand an overhaul of the global trading system, with Treasury Secretary Scott Bessent likening a Spanish suggestion that Europe align more closely with Beijing to “cutting your own throat.”

But officials in Brussels acknowledge the lure of potential Chinese offers to provide more access to their huge market to European goods whilst capping their own production in key sectors like electrical vehicles which could otherwise overwhelm EU manufacturers, sources said. (See MNI INTERVIEW 2: China Willing To Further Open To EU Imports)

"We fought for decades for access to China's markets, so if there is an opening on offer it would not be very smart not to grab that. Having said that how can we manage the risks?” one official said.

US PRIORITY

For the moment at least, trying to secure a deal with the U.S. before the expiry of Washington’s 90-day postponement of threatened higher tariffs is key, sources said.

"The U.S. is a big market, and the EU has a lot of investments it needs to defend there. It has the bigger political weight and the U.S. is for now dominating the whole choreography of global trade policy. So that's the priority," said one official.

China wants the EU to revive the stalled Comprehensive Agreement on Investments, but, while European officials say renewed talks may be possible, they are not sure how the trade-offs would be managed for such a major market-opening. One source noted that the incoming German coalition government has blocked China from projects related to its new EUR500 billion infrastructure fund.  (See MNI: China To Hit Back Against US, Seek Europe Ties - Advisors)

"We might not be able to offer enough to make CAI worthwhile, that is the big question. Our options are limited," said one official. 

The EU will also be wary of being seen to move closer as a bloc to China.

"We wouldn't want to give off the idea that we are ganging up on the U.S.,” another trade source said."

BILATERAL DEALS

One way of negotiating the narrow passage between the Scylla of Washington and the Charybdis of Beijing would be for the EU to continue turning a blind eye to member states seeking their own trade and investment deals with China.  

"No-one can stop the member states from pursuing bilateral trade and investment deals," one source said, as Spain’s Prime Minister Pedro Sanchez met in Beijing with Chinese Premier Xi Jinping, who urged the EU to work with him to defend globalisation.

"It could well be that any opening to China ends up being conducted by member states. That's always been the tradition anyway.”

China’s willingness to cap production on electric vehicles may also allow the bloc to agree to lower tariffs imposed on the sector last year, officials said, adding that they were also hopeful that Beijing can allay concerns over a potential flood of goods which might otherwise have gone to the U.S. being diverted to the EU.

Even relative China hawks like France, which backed anti-dumping duties on Chinese electric vehicles last year, may be prepared to alter their position, one official said.

"France made a miscalculation and its cognac exports [to China]vgot hit. It tried hiding behind the Commission but China saw through that. I think it's got the message now and may be incentivised to support a deal,” the official said.