EU Trade Chief: Balancing Integration with China and Self-Protection is Essential
Valdis Dombrovskis, the Executive Vice President of the European Commission for An Economy that Works for People, emphasized that the European Union (EU) has no intention to decouple from China but must prioritize protecting itself when its openness is exploited. Dombrovskis made these remarks as both sides seek to ease rising tensions over geopolitics and trade. The EU has been concerned about Beijing's ties with Moscow following Russia's invasion of Ukraine, as well as its efforts to reduce reliance on China as the world's second-largest economy.
During a speech at the annual Bund Summit conference in Shanghai, Dombrovskis highlighted the significant trade deficit between the EU and China, which amounted to nearly 400 billion euros ($426.08 billion) last year. As the bloc's trade commissioner, Dombrovskis embarked on a four-day visit to China to foster more balanced economic ties with the EU. His visit comes shortly after the European Commission announced an investigation into potentially imposing punitive tariffs to safeguard European producers from cheaper Chinese electric vehicle imports benefiting from state subsidies.
The trip aims to reestablish dialogue with China after the disruptions caused by the COVID-19 pandemic. Both sides seek to address issues related to foreign investment, trade, geopolitics, and Western criticism of Beijing's closer alliance with Moscow. Dombrovskis emphasized that the EU's founding principles include creating an open market among its members and promoting free and fair global trade. However, he stressed the need for the EU to protect itself when its openness is exploited.
While the EU does not intend to decouple from China, Dombrovskis emphasized the importance of minimizing strategic dependencies on certain products. The EU's economic strategy focuses on de-risking rather than decoupling. The trade deficit is partly attributed to Chinese restrictions on European companies, which have created numerous barriers to market access. EU Ambassador to China, Jorge Toledo, expressed concern about the trade deficit, describing it as the "highest in the history of mankind" during a forum in Beijing.
The upcoming economic and trade dialogue between Dombrovskis and Chinese Vice Premier He Lifeng, scheduled for Monday, will be a crucial "litmus test" for both sides. Dombrovskis stated that substantial technical work preceded the EU's investigation into Chinese-made electric vehicles, and they plan to engage Chinese authorities and industry in the investigation. The EU aims for fair competition in the electric vehicle sector and seeks to address potential trade irritants and barriers in various sectors.
In his speech, Dombrovskis acknowledged China's challenging macroeconomic adjustment process but emphasized the importance of broadening access for foreign businesses and maintaining a stable business environment to ensure fair trade relations. He also urged China to take a stance against Russia's "tactic of weaponizing food" and encouraged China to use its influence to revive the expired Black Sea Grain Initiative, which Moscow had withdrawn from in July.
EU's Balancing Act with China: Implications for New Business Formation
Valdis Dombrovskis, the Executive Vice President of the European Commission for An Economy that Works for People, recently emphasized the EU's intention to maintain ties with China while protecting its interests. This stance could have significant implications for new businesses looking to enter the European or Chinese markets.
Trade Deficit and New Businesses
Dombrovskis highlighted the significant trade deficit between the EU and China, which stood at nearly 400 billion euros ($426.08 billion) last year. For new businesses, this deficit underscores the challenges of entering a market where trade imbalances exist. New businesses must navigate these imbalances while ensuring their sustainability and profitability.
De-risking, Not Decoupling
While the EU does not intend to decouple from China, Dombrovskis stressed the importance of minimizing strategic dependencies on certain products. This focus on de-risking rather than decoupling offers a lesson for new businesses: the need to diversify their supply chains and reduce reliance on a single market or source.
Future Dialogue and Market Access
The upcoming dialogue between Dombrovskis and Chinese Vice Premier He Lifeng will be a crucial "litmus test" for both sides. For new businesses, the outcome of this dialogue could influence their market entry strategies, particularly in terms of foreign investment and trade. Dombrovskis' emphasis on broadening access for foreign businesses also signals potential opportunities for new businesses to enter the Chinese market.
In summary, the EU's stance on its relationship with China, characterized by a balance between integration and self-protection, presents both challenges and opportunities for new businesses. These businesses will need to closely monitor these developments as they shape their strategies for entering the European or Chinese markets.
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