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27th May 2019

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EU-China united on climate, divided on trade

EU and Chinese leaders emphasised on Friday (2 June) the need for closer relations in an unstable world, whilst concealing disagreements behind their unity on fighting climate change in the face of the US retreat from the Paris agreement.

"My impression is that it was the most fruitful and most promising summit," European Council president Donald Tusk said after a meeting with Chinese prime minister Li Keqiang and European Commission president Jean-Claude Juncker.

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He said that they "found what [they] have in common", but admitted that they "still need more time to be more precise in some aspects".

"Stable" EU-China relations are "useful to counter instability in this world," noted the Chinese premier, who added that this "requires our constant efforts to resolve existing issues".

The 19th EU-China summit signified a remarkable shift in global politics, as Trump’s pullout from the Paris deal once again cast doubts on the US’ leading role in international affairs, and prompted a more confident EU-China rapprochement.

Both sides "share a fundamental interest in upholding and strengthening the rules-based international system," Tusk said.

"We have a joint responsibility to protect this system," he added.

A day after Trump rejected the Paris agreement, the EU and Chinese leaders repeated their support for the deal.

"We are convinced that yesterday's decision by the United States to leave the Paris Agreement is a big mistake," Tusk said. "But the fight against climate change, and all the research, innovation and technological progress it will bring, will continue, with or without the US."

“Fighting climate change is more important today than yesterday. […] There is no reverse gear on energy transition, no backsliding on the Paris agreement,” European Commission president Jean-Claude Juncker told a business conference earlier on Friday.

The leaders reaffirmed their commitment to the full implementation of the Paris deal in a joint statement and committed to cutting fossil fuels, developing green technology, and to helping cut the emissions in poorer countries with a fund of $100 billion a year by 2020.

However, differences on trade loom over the fresh alliance.

Fair trade

The EU wants Beijing to wrap up an investment agreement, which would guarantee a level playing field and fair treatment for European businesses that are discriminated against on the Chinese market.

“One in two European companies say they feel less welcome when they entered the [Chinese] market, and more than half say they are treated unfairly compared to their Chinese competitors,” Juncker said.

He cited a World Bank survey, in which China ranked 78th place out of 183 countries in terms of ease of doing business. “A big economic powerhouse needs to be higher than mid-table,” he added.

A comprehensive agreement on investment would be a "game-changer”, Juncker said. He highlighted that while Chinese investment into the EU increased by 77 percent last year, the capital flow from the EU to China declined by almost one quarter.

Juncker also highlighted that the rule of law and human rights are a “prerequisite” for an attractive and stable investment environment.

The EU executive’s chief also urged China to address its overcapacity in production, especially in the steel sector, which hurts EU companies.

In addition, Juncker said that China should allow European companies to access contracts in China's multi-billion dollar Belt and Road infrastructure investment initiative on the same conditions as Chinese companies.

The Chinese premier responded by saying that China is making progress, and the level of investment would have been unimaginable three decades ago.

“I hope you can put things into context, we are working on the problems, the investment environment is getting better,” Li Keqiang said.

“We need to calm down and assess how we can best guarantee free trade and implement fair trade. We need to uphold multilateral rules,” the premier said.

“This world will be a jungle without multilateral rules,” he added.

Li Keqiang also turned around the EU's insistence on international rules to demand that China is granted market economy status by the EU, according to World Trade Organisation (WTO) rules.

Europeans are wary of granting this status to China, for fear of Chinese economic dumping on EU markets.

"The EU must apply article 15," Li Keqiang said, referring to the WTO clause, which says that a country should be considered as a market economy 15 years after it joins the organisation.

On steel and WTO, "we were ble to narrow the positions but we are not there yet," Juncker noted.

EU and China move to fill US void

At a summit in Brussels, EU and Chinese leaders will attempt to deepen ties on trade and climate as US president Trump plans to pull out of the Paris climate deal.

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EU and Chinese SMEs matchmake in Brussels

While EU and Chinese political leaders discussed climate change and trade at the European Council in Brussels, hundreds of small and medium-sized enterprises from China and all across Europe participated in the EU-China SMEs Matchmaking Event at the Bozar.

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