China Proposes Trade Pact with Europe Against America

China is pressuring the European Union (EU) to issue a strong joint statement against the trade policies of U.S. President Donald Trump at a summit scheduled for later in July, but is facing resistance, European officials say.

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At meetings in Brussels, Berlin, and Beijing, senior Chinese officials, including Vice Premier Liu He and the top diplomat of the Chinese government, State Councilor Wang Yi, proposed an alliance between the two economic powers and offered greater opening of the Chinese market as a gesture of goodwill. One of the proposals was for China and the EU to launch a joint action against the U.S. at the World Trade Organization (WTO).

However, the European Union, the world’s largest trading bloc, has rejected the idea of aligning with Beijing instead of Washington, five EU officials and diplomats told Reuters ahead of the China-EU summit in Beijing on July 16 and 17.

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Instead, the summit is expected to conclude with modest statements reaffirming both sides’ commitment to a multilateral trading system and promising to establish a working group to modernize the WTO, EU officials said.

Vice Premier Liu He privately stated that China is ready for the first time, at the annual summit, to determine which sectors it can open to European investments. Chinese President Xi Jinping, Premier Li Keqiang, and leading EU officials are expected to attend the summit.

Chinese state media have promoted the message that the European Union is on China’s side, officials said, placing the European bloc in a sensitive position. The last two summits, in 2016 and 2017, ended without a statement due to disagreements over the South China Sea and trade.

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“China wants the European Union to stand with Beijing against Washington, to choose a side,” said one European diplomat. “We will not do that, and we have told them so.”

China’s Ministry of Foreign Affairs did not immediately respond to Reuters’ request for comment on Beijing’s goals at the summit. In a comment published on Wednesday, China’s official news agency Xinhua stated that China and Europe “should jointly resist trade protectionism.”

“China and European countries are natural partners,” the statement said. “They firmly believe that free trade is a strong engine of global economic growth.”

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Chinese Moment?

Despite Trump’s tariffs on European metal exports and threats to impose them on the EU automotive industry, Brussels shares concerns with Washington about the closed nature of the Chinese market, as well as what they consider in the West to be China’s manipulation of trade to dominate global markets.

“We agree with almost all of the complaints that the U.S. has against China, we just disagree with how the U.S. is addressing them,” said another EU diplomat.

Nevertheless, China’s stance is surprising given Washington’s deep economic and security ties with European states. It shows the depth of China’s concern about the trade war with Washington, as Trump imposes tariffs on billions of dollars worth of Chinese imports starting July 6. It also highlights China’s newfound boldness in attempting to take the lead at a time of division between the U.S. and its European, Canadian, and Japanese allies on issues including free trade, climate change, and foreign policy.

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“Trump has divided the West, and China wants to capitalize on that. They have never been satisfied with the West being a single bloc,” said a European official involved in EU-China diplomacy. “China now feels it can try to divide the European Union on many fronts,” the official said.

Another official described the dispute between Trump and Western allies at last month’s G7 summit as a gift to Beijing, as it showed how European leaders are losing a long-time ally, at least in trade policy.

European envoys say they felt China’s greater agility in finding like-minded countries willing to oppose Trump’s “America First” policy as early as 2017.

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No Systematic Changes

A report by the New York consulting group Rhodium Group from April showed that Chinese restrictions on foreign investments are greater in every sector except real estate. Compared to the European Union, unlike many large Chinese acquisitions in the Union, such acquisitions would not be possible for European companies in China.

China has promised to open its market. However, EU officials assume that any move will be more symbolic than significant.

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They say that China’s May decision to reduce tariffs on imported cars will make little difference as imports make up a small part of that market. China plans to rapidly pivot towards electric vehicle production, meaning that any new concessions offered to traditional European car manufacturers will be short-lived.

“Whenever the train leaves the station, we are allowed to enter the boarding platform,” said a European executive in Beijing.

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The European Union is seeking to pass legislation to enable greater oversight of foreign investments in the EU. “We still do not know if this offer to open up is sincere,” said a third EU diplomat. “It is unlikely that the (Chinese) will make a systematic change.”