San Francisco Frontiers - EU chief warns China on trade gap ahead of summit

While the president of the European Commission stressed that EU states would prefer negotiations to a trade war she left an implied threat of protectionist measures on the table.

"We have tools to protect our market," von der Leyen told an AFP reporter in an interview for the European Newsroom, while adding: "But we prefer to have negotiated solutions."

Von der Leyen, top EU diplomat Josep Borrell and Charles Michel, the president of the European Council, will be in Beijing on Thursday for the EU-China summit.

It will be the first in-person summit between the Brussels chiefs and Chinese President Xi Jinping and Premier Li Qiang since 2019, and it will focus on trade and the wars in Ukraine and the Middle East.

On the economy, von der Leyen stressed that Europe was not trying to "de-couple" itself from the Chinese powerhouse, but rather to "de-risk" ties that had become too one-sided.

- Growing imbalance -

She dubbed the talks a "summit of choices", stressing that both sides would have to decide whether they are prepared to make concessions to preserve the relationship.

"We have seen a growing trade imbalance. The trade imbalance has doubled in the last two years to up to almost 400 billion euros ($430 billion) by now," she said.

"European leaders will not tolerate over time an imbalance in the trade relationship," she said.

"But we prefer to have negotiated solutions. And these are the choices that, for example, now are on the table and where I think it is also in China's interest to look carefully at these choices."

While the European market has proved a lucrative draw for Chinese investment and exports, EU firms have not enjoyed open access to China's growing consumer middle class.

Von der Leyen said the EU side is also "looking at the question of hidden and direct and indirect subsidies to Chinese companies in competition to the European companies".

Von der Leyen's commission has launched an investigation into China's electric vehicle industry, fearing subsidised imports could stifle EU innovation in a huge new sector.

"We have learned our lessons from the solar panels," citing a green tech sector now dominated by Chinese firms despite a global rush to decarbonise energy production.

Separately, a senior European official speaking on condition of anonymity, laid out Brussels' trade concerns in more detail -- along with concerns about Chinese retaliation.

"We've seen retaliation by the Chinese before. It's usually not symmetric. So it doesn't necessarily hit exactly the same sectors," he said.

"If they want to retaliate they'll probably hit other sectors, politically sensitive sectors."

- MEPs sanctioned -

The official noted that Europe is entering an election cycle in the run-up to next year's European Parliamentary elections, and that relations with China could come under political pressure.

"The Chinese side is very well aware of this," he said.

"My feeling is they're fully aware of the overcapacity and the effect it has around the world, not just on us, but we're seeing basically a domino effect as other major economies are closing their market."

The United States -- firstly under former president Donald Trump and continuing under President Joe Biden -- has taken a tougher line on China.

Europe, von der Leyen said, will take its own route but shares many of Washington's concerns, including about China's support for Russia despite Moscow's war against Ukraine.

The EU chief also warned that China's attitude at the COP28 summit in Dubai was under scrutiny, with the West anxious that the Asian giant pull its weight in reducing greenhouse emissions.

Von der Leyen also intends to raise with her Chinese interlocutors the case of European parliamentarians sanctioned by Beijing.

"I have always considered these sanctions to be unjustified," she said.

French MEP Raphael Glucksmann and Germany's Reinhard Buetikofer, president of the European Parliament's delegation for relations with China, were sanctioned by Beijing in 2021 for denouncing Chinese repression against the Muslim Uyghur minority.

"I think it's important that we do not only see China as a trading partner and industrial powerhouse but also as a technological competitor and military power, and as a global actor that has distinct and divergent views on the global order," von der Leyen said.

J.Scott--SFF