The finer details of an agreement between the European Union and China last week worked out well for an industry that doesn’t usually find itself caught up in geopolitical negotiations: ice cream producers.
European governments have become exasperated at the widening imbalance in their trading relationship with the Chinese economic behemoth.
China is exporting vastly more into the EU market than European businesses are able to sell in the other direction. The difference, known as the trade deficit, has exceeded €1 billion a day.
Europe’s industrial beasts are struggling to compete with cheaper, state-subsidised products flooding in from China, be it electric vehicles, solar panels or consumer goods.
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For decades cars, chemicals and manufacturing industries have been the engine of the European economy. So when factories start to close, governments get worried.
That was the backdrop to talks last week between EU trade commissioner Maroš Šefčovič and Chinese commerce minister Wang Wentao to prevent tensions between Brussels and Beijing spinning into a trade war.
The two sides reached an agreement, seen as something of a test case: China’s exports of hybrid and plug-in hybrid cars into the EU will be capped at 350,000 vehicles a year.
The deal represents a big shift in European thinking. For a long time the focus was on efforts to gain greater access into the Asian market. “We are now more focused on having China sell less to us,” said a senior official in the European Commission.
[ ‘We’re at a tipping point’: EU prepares its toughest weapon yet against ChinaOpens in new window ]
The deal on hybrids includes a couple of add-ons. For example, China agreed to lower tariffs on imports of European ice cream, olive oil, footwear and car parts.
That’s just a sweetener, rather than a solution. “We’re not going to rebalance the [trade] relationship by exporting more ice cream ... The focus is firmly on export moderation,” the same commission official said.
The EU will want to replicate that cap on hybrid car imports and negotiate similar controls to restrain excessive Chinese competition in other manufacturing sectors.
The EU’s 27 leaders met in Brussels on Thursday for a summit to discuss ideas for defensive “tools” that might be used if further dialogue with China goes nowhere. “We have to protect our market,” Luxembourg’s prime minister Luc Frieden said on Thursday.
In the past Berlin acted as a brake, nervous of provoking retaliation from Beijing. But German chancellor Friedrich Merz and French president Emmanuel Macron recently came together to back a tougher line, greatly improving Sefcovic’s leverage in talks. That seemed to work.
The concessions from China on hybrid vehicles have taken the heat out of things for the time being.
[ EU prepares its toughest weapon yet against ChinaOpens in new window ]
