EU, Chinese Leaders Pledge to Escalate Cooperation on Trade, Investment, and Environmental Priorities
Chinese and EU leaders met in Beijing, China, on Monday 16 July for a high-level summit, which saw them affirm their support for a rules-based trading system with the WTO at its core, establish a working group on reforming the organisation, and confirm key advances in a separate negotiating process for a bilateral investment treaty.
In a joint statement, both sides highlighted their ongoing investment treaty negotiations as “a top priority and a key project towards establishing and maintaining an open, predictable, fair, and transparent business environment for their respective investors.” They confirmed that they have exchanged market access offers, a long-awaited development which they say could add essential momentum to the talks, now entering their sixth year.
Following the summit, the parties also endorsed the EU-China Leaders’ Statement on Climate Change and Clean Energy, which was incorporated as an annex to the joint statement, and includes references to collaboration in climate finance and carbon markets.
Both sides also committed to deepening their partnership across on a range of issues through the implementation of the EU-China 2020 Strategic Agenda for Cooperation.
The EU was represented by President of the European Council, Donald Tusk, and President of the European Commission, Jean-Claude Juncker, along with other top EU officials such as European Commission Vice-President for Jobs, Growth, Investment, and Competitiveness, Jyrki Katainen, Trade Commissioner Cecilia Malmström, and Transport Commissioner Violeta Bulc.
Chinese Premier Li Keqiang and Chinese President Xi Jinping both met with EU leaders, as did other top-level officials.
Trade discussions on WTO reform, steel overcapacity, and intellectual property
In a speech to business community leaders in tandem with the summit, Juncker said, "I am more convinced than ever that, in the era of globalisation and of interdependence, multilateralism must be at the heart of what we do. We expect all our partners to respect international rules and commitments that they have taken, notably within the framework of the World Trade Organization.”
Juncker noted that the WTO’s current rulebook needs updating to better address “unfair practices,” while adding that “we must all preserve the multilateral system and improve it from within."
At the summit press conference, Li agreed, saying via a translator that both sides “need to improve the governance system, including the WTO, while upholding the WTO principles and the rules-based order and free trade.”
The summit’s joint statement confirmed previously-announced plans for a joint working group on WTO reform, which will be chaired by vice ministers from both sides, and allow for exploring options in further depth.
Additional details on how the working group will function, what deliverables it aims to develop for contributing to ongoing or new negotiations among the WTO membership in Geneva, and how other interested parties may participate in these talks, have not been publicly confirmed. (See Bridges Weekly, 28 June 2018)
Tusk appealed to all EU partners to contribute positively to WTO reform goals. He highlighted the need for “new rules in the field of industrial subsidies, intellectual property, and forced technology transfers, reduction of trade costs, as well as a new approach to development and more effective dispute settlement.” He added, “The aim of this reform should be to strengthen the WTO as an institution and to ensure a level playing field.”
Tusk then called on US President Donald Trump and Russian President Vladimir Putin, who happened to be meeting for a bilateral summit in Helsinki, Finland, this week, to support WTO reform efforts.
"It is a common duty of Europe and China, America and Russia, not to destroy this order, but to improve it. Not to start trade wars, which turned into hot conflicts so often in our history, but to bravely and responsibly reform the rules-based international order,” Tusk said.
EU and Chinese leaders also discussed industrial overcapacity concerns and reforms in the steel industry, which have been areas of past trade tensions between them. These topics have also been the focus of recent collective efforts to resolve the global steel crisis, with the goal of bringing production back to more sustainable levels and ensuring fair competition.
Both sides agreed to strengthen cooperation in the Global Forum on Steel Excess Capacity, set up nearly two years ago following the G20 summit in Hangzhou, China, along with implementing the policy recommendations from both that summit as well as last year’s G20 gathering in Hamburg, Germany.
The Forum was created at the Hangzhou summit in response to an unprecedented level of steel overcapacity in global markets, which experts say lowered steel prices and harmed jobs in the steel and other industrial sectors. (See Bridges Weekly, 7 December 2017)
In his comments, Li also addressed intellectual property (IP) rights enforcement concerns and allegations of forced technology transfers for overseas investors wishing to do business in China, which are points of friction between Brussels and Beijing.
“As long as you register in China, you will be treated the same as Chinese companies. And we forbid any forced transfer of intellectual property, and we will deal with IP violations with all seriousness,” he said, directing his comments at foreign companies interested in investing in China.
The EU recently launched a WTO dispute on the subject, with China as a respondent (DS549). The US has already put forward a similar case (DS542). Both cases are at the initial stage in WTO dispute settlement proceedings, specifically at the consultations stage.
As part of the summit, the parties agreed to an Action Plan concerning China-EU Customs Cooperation on Intellectual Property Rights for the period 2018-2020, which updates an existing plan. The action plan, officials say, will be comprehensive in nature, aiming to boost intellectual property rights enforcement as goods cross borders.
Moving forward on the investment treaty
European and Chinese officials also continued talks on a bilateral Comprehensive Agreement on Investment, which have been underway since 2013. (See Bridges Weekly, 7 June 2018)
Negotiators exchanged market access offers, which leaders said will pave the way for a “new phase” in the high-profile talks. The EU and China say they hope to make advances soon on the textual aspects of the agreement as well.
At the summit press conference, Juncker discussed the reasons for the difference between European foreign direct investment (FDI) in China, €6 billion in 2017, and the over €30 billion China invested in Europe the same year.
“This gap reflects a concern amongst our investors on the regulatory and administrative burden that foreign companies sometimes have to face in China,” he said.
He emphasised the need for a “level playing field” and a “two-way,” open investment environment. Referring to the market access offers, he said that “this is an important step but only the first one; what we need is an Agreement that fulfils our common ambition and gives investors on both sides predictable and long-term access to our respective markets.”
Common goals on climate and oceans
Chinese and EU leaders also used the summit to build on past cooperation on both climate action and oceans conservation. In an annex to the joint statement, the parties agreed to enhance their cooperation on climate, as part of their preparations for the UN climate talks later this year. They expressed their shared hope that COP24 will yield a “successful and meaningful outcome under the agreed work programme to prepare for the implementation of the Paris Agreement.”
COP24 refers to this year’s 24th Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC), set to take place in Katowice, Poland, in December.
The EU and China agreed to increase cooperation across a suite of climate and energy targets, including energy efficiency, clean energy, and low-carbon transport, among others. They also signed a memorandum of understanding (MOU) on emissions trading, agreeing to use their respective emissions trading systems (ETS) to combat climate change and explore prospects for broader carbon market collaboration.
China’s nascent ETS began in December 2017, building on previous regional pilot schemes. In its initial period, the ETS will only cover the power sector. The MOU envisages an annual policy dialogue and joint cooperation initiative through research, seminars, and working groups. (See Bridges Weekly, 18 January 2018)
Additionally, China and the EU signed a Partnership Agreement on Oceans, through which they plan to enhance oceans governance work, taking steps to eradicate illegal, unreported, and unregulated (IUU) fishing, protect marine biodiversity, tackle marine pollution, and ensure “a sustainable blue economy.”
The statement comes as WTO negotiators work on an accord that would tackle harmful fisheries subsidies, including those directed towards IUU fishing, with the goal of endorsing a deal at the global trade club’s next ministerial conference. Eliminating subsidies to IUU fishing entirely by 2020, along with banning subsidies that exacerbate overfishing and overcapacity, also make up one of the targets in UN Sustainable Development Goal (SDG) 14 on life below water.
The EU touted the partnership agreement as the first of its kind, opening the door for further bilateral or multilateral ocean partnerships among key players, which could complement international efforts on oceans governance.