Xi Jinping’s visit to Europe, the first since his assuming office a year ago as well as the first by a top leader from China in more than three decades, was significant for two reasons. The first was the possibility of China negotiating a bilateral trade agreement with EU in the foreseeable future. The second was his candid remarks on democracy in China.
Much like its trade with the US, China’s trade with the EU too has been robust but spotted with irritants. Both sides have been agitated over alleged dumping by exporters. EU has been vigilant over large-scale Chinese exports of solar panels and has initiated anti-dumping investigations. China has retaliated with anti-subsidy investigations against EU made wines and polysillicon. EU, along with the US and Japan, has also had reservations against China’s policy of discouraging rare earth exports and has been able to secure a favourable ruling on this at the WTO.
The tacky issues notwithstanding, China has opened a new window of engagement with Europe in a manner similar to it has with the US. Trade and investment are clearly the topmost priorities in this regard. In what are notable developments in the bilateral economic space, EU endorsed China’s participation in the plurilateral Trade in Services Agreement (TISA) being negotiated outside the WTO. At the same time, the ground has also been set for discussions on a bilateral investment deal. There are expectations that progress on the investment discussions will encourage both the EU and China to visualise a bilateral FTA in the near future.
Both China and EU will be keen on a bilateral FTA given their proclivities for bilateral and regional agreements. The Asia-Pacific has been high on China’s radar in this regard, particularly the ASEAN, Australia, New Zealand and also Latin American countries like Chile and Peru. Ongoing bilateral investment discussions with the US and an objective assessment of the TPP are likely to see China join the TPP in future. In the meantime, it continues to negotiate the RCEP with India and other bilateral FTA partners of the ASEAN. All these though, geographically, are focused on the Pacific and its surroundings. China is keen on formalising trade links across the Atlantic too and that inevitably draws its focus on the EU, which is China’s largest trade partner. The EU, on the other hand, has been busy stitching economic partnerships with Africa, running trade deals with