Von der Leyen, Macron expected to confront Xi on unfair trade practices, Russia ties

6 months ago 18

EU leaders on Monday (6 May) are set to warn Chinese leader Xi Jinping over his country’s unfair trade practices towards Europe but also encourage Beijing to play a greater role in Ukraine diplomacy.

Trilateral talks between French President Emmanuel Macron, European Commission President Ursula von der Leyen and Chinese President Xi Jinping in Paris come amid strained relations over reciprocal sanctions and the EU’s economic de-risking strategy towards Beijing.

According to EU officials, Paris and Brussels will have two core messages on Chinese market-distorting practices and support for Russia’s military capabilities in its war against Ukraine.

Von der Leyen is expected to have harsher messaging on Beijing’s unfair trade practices and Macron warning Xi of the danger of backing Russia in its invasion of Ukraine.

“It is in our interest to get China to weigh in on the stability of the international order,” said Macron in a recent Economist interview. “We must, therefore, work with China to build peace,” he added.

However, he said, Europe must defend its “strategic interests” in its economic relations with China since Beijing is not respecting international trade rules.

Unfair competition

“We have to act to make sure that competition is fair and not distorted,” von der Leyen told several media, including Euractiv, ahead of the talks.

Von der Leyen said that in previous meetings with Xi, twice in the past year, she had “made clear that the current imbalances in market access are not sustainable and need to be addressed”.

“China is currently manufacturing, with massive subsidies, more than it is selling due to its own weak domestic demand – leading to an oversupply of Chinese subsidised goods, such as EVs and steel, leading to unfair trade,” she said.

Beijing has recently called the most recent investigation into suspected unequal access to China’s medical devices market a sign of EU “protectionism”.

The investigation and the raid followed multiple anti-subsidy probes aimed at China by the European Commission in recent months, including ones into the sales of electric vehicles (EVs), trains, solar panels, and wind turbines.

“Europe cannot accept such market-distorting practices that could lead to de-industrialisation in Europe,” she added.

The European Commission chief said she “encourage the Chinese government to address these overcapacities in the short-term,” adding the EU would “closely coordinate with G7 countries and emerging economies that increasingly affected by China’s market distortions”.

Von der Leyen reiterated, “the EU should de-risk its relations, but not de-couple from China”, about her doctrine spelt out more than a year ago that since then has driven the bloc’s trade policy with Beijing.

Divide and conquer

Beijing’s response has been relatively “muted” because it is keen to avoid an escalatory spiral of anti-subsidy investigations, which would jeopardise Xi’s broader strategic mission of “driving a wedge between Europe and the US”, Alicia García-Herrero, senior fellow at Bruegel, told Euractiv.

More immediate goals of Xi’s visit, according to her, include getting Macron to distance himself from the EU executive’s recently more hardened stance towards Beijing and encourage Paris to refrain from supporting the reappointment of von der Leyen – who is distinctively more hawkish on China than him.

“Xi is not on a mission to repair ties, because from his point of view, all is well: he argues that there are no over-capacities and that what happens between China and Russia is just normal trade,” Janka Oertel, director of ECFR’s Asia programme, said in comments emailed to Euractiv.

Both core European messages “are unlikely to have a significant impact on Chinese behaviour,” she said.

Instead, the challenge for Macron and von der Leyen will be to “send a clear signal that Europe is willing to use the tools it has constructed over the last few years to defend its industries from unfair competition” and is “ready to sanction more Chinese companies for their critical support of Moscow’s war effort”.

However, EU officials see this as challenging as Xi’s visit was designed by Beijing to show that relations with Europe are still relatively good despite the irritants and internal division.

“Looking at the capitals he chose – Paris, Budapest, Belgrade – he did choose those where he will likely be welcome,” one EU official remarked.

“[Xi] has three very different agendas: [One is] to demonstrate that he is a welcome member of the international community and has friends among the G7 (France),” Oertel said.

The other two stops would allow him “to address US hypocrisy and NATO overreach by commemorating the 25th anniversary of the NATO bombing of the Chinese embassy in Belgrade” and to “underscore the opportunities that engagement with China, particularly in the realm of green tech, brings about (Hungary).”

[Edited by Alice Taylor]