Chinese President Xi Jinping won a promise from the European Union yesterday (31 March) to consider a multi-billion-dollar free-trade deal with his country, a long-held goal for Beijing which divides Europe.
Xi, the first Chinese leader to visit the EU institutions in Brussels since ties were established in 1975, pressed senior EU officials to consider such a pact, despite European concerns that Chinese state-owned firms flout international trade rules.
The 28-nation EU committed for the first time to opening talks on a free-trade accord (FTA) if current negotiations on an “investment agreement” to improve business ties are successful.
“Concluding such a comprehensive EU-China Investment Agreement … will convey both sides’ joint commitment towards stronger cooperation as well as their willingness to envisage broader ambitions including, once the conditions are right, towards a deep and comprehensive FTA, as a longer-term perspective,” the two sides said in their summit statement.
Talk of a free-trade deal, which would create a market of almost 2 billion people, seemed unthinkable just a year ago, when Brussels prepared to levy punitive import duties on billions of dollars of Chinese solar panels, setting off the biggest ever trade dispute between the two partners.
Relations have improved since the sides defused the row, setting a minimum price for exports of Chinese goods to the EU.
Both China and the EU have something to gain from increased trade. Europe’s economy is barely growing after years of recession and the continent is suffering from near-record unemployment, while China’s much faster growth is cooling.
British Prime Minister David Cameron expressed strong support during a trip to Beijing in December for such a deal, but many other EU members including France, Italy and Spain are wary, saying China tries to dominate European markets with cheap, subsidised exports.
China’s Xi, on the last leg of a European tour, has put a free-trade deal at the centre of his EU policy, even using “panda diplomacy” during his trip to Belgium by visiting two Chinese pandas on loan to a Belgian zoo to charm officials.
Beijing has a long tradition of using pandas, which are indigenous to China, to improve relations with other countries.
According to one EU official at Monday’s summit, Xi pushed hard for the EU to consider the free-trade pact. “China wanted to go further on an FTA,” the official said after Xi’s meeting with European Council President Herman Van Rompuy and European Commission President José Manuel Barroso.
“Europe agrees to go ahead with this target in the medium term. We prefer to go ahead first with an investment agreement.”
Negotiations towards such an investment agreement are under way and should make it easier for European countries to do business in China, a big step that many see as a potential forerunner to a trade deal.
European companies complain of poor treatment in China, such as being forced to share sensitive know-how to win access to Chinese funding and local contracts.
In a statement, China’s foreign ministry said both sides “should start the feasibility study on a free-trade agreement, and jointly improve the quality and level of China-EU trade”.
Europe is China’s most important trading partner, while for the EU, China is second only to the United States. Trade between the EU and China has doubled since 2003 to more than €1 billion a day.
But the bilateral relationship has been bedevilled by a series of trade rows ranging from steel and wine to solar panels. China’s ambition to produce more sophisticated products to compete with European goods also unnerves some Europeans.