EU Clamps Down on China Trade Imbalance Despite Rare Earth Breakthrough

The EU, after a one-day summit in Beijing, struck a tentative deal with China to ease export restrictions on crucial rare earths. However, the bloc remains resolute in its demand for a significant rebalancing of trade relations, amidst lingering tensions over industrial overcapacity and market access.

Trade Concerns Remain Despite Rare Earth Deal:

• The EU welcomed China’s rapid-fire approval of rare earth export licenses and a new oversight system for supply chain issues, addressing concerns triggered by Beijing’s earlier restrictions.
• However, EU leaders emphasized the need for further progress to tackle the €300 billion trade deficit with China in 2024, exceeding the bloc’s acceptance of “fair competition” and calling for greater market access in China for European businesses.

Key Points of Contention:

• Market Access: The EU insists on reciprocal market access for its companies, similar to the access enjoyed by Chinese firms in Europe, highlighting persistent discrepancies in access and treatment.
• Industrial Overcapacity: Brussels remains critical of China’s use of subsidies to fuel domestic industries, creating artificial competition and cutting into European firms’ market share.
• Ukraine War: The EU criticized China’s support for Russia, accusing it of enabling the ongoing conflict, despite China’s denial.

Impact of Recent Trade Disputes:

• The recent trade dispute over electric vehicle tariffs was exemplified by the EU’s imposition of duties on Chinese-made EV imports, followed by retaliatory moves from Beijing targeting EU agricultural products.

Looking Forward:

• While the summit yielded progress on rare earths, fundamental disagreements persist regarding trade imbalance, market access, industrial practices, and China’s role in the Russia-Ukraine war.
• The EU warned that failure to address these issues could compel it to reconsider its openness to Chinese trade and investment.

Overall Tone:

The summit signals a mixed bag for EU-China relations. While the rare earth accord offers a glimmer of hope, deep-rooted trade concerns and political disagreements suggest a more complex and potentially volatile future.