Sino–EU Trade Relations and Their Interdependencies

The ongoing Sino-US trade and tech war has indirectly led to the EU playing an even greater role as one of China’s most important trading partners. Conversely, the Chinese market is also very important for the EU, as China is the third largest destination for EU exports. Since the Second World War, the EU has played a central role in developing the rules-based international trading system, allowing its companies to enjoy fairer market access abroad. The EU’s Common Commercial or Trade Policy operates as a single player within the WTO and is represented by the European Commission rather than individual member states. In recent decades, the WTO has been expanded to include many transition and developing countries with their own wishes to reform the WTO such as gaining better access to global value chains. The EU is looking for opportunities to modernize the WTO through, among other aspects, state interventions as an approach to climate transition and more inclusiveness of developing countries. However, recently there has been little motivation from the US and China to reform the WTO, endangering the EU as a defender of the WTO. Another more current issue concerns the changing European industrial landscape, as China has been trying to export its overcapacity for a long time and has opened many more firms and factories than the markets need. In response, both the US and EU express some concerns about fair competition with Chinese state-owned enterprises and call for reciprocity on trade and market access. Although China is further opening its market to foreign firms, it is still denied the “market economy” status at the WTO by both the US and the EU. All these developments have led to the EU being increasingly forced to manoeuvre between the desire to protect a cleaner environment with dependence on China’s cheap electric cars, solar panels, and rare earths and, on the other hand, the desire for a common EU industrial policy, which forces the EU, like the US, to resort to protectionism in the hope of becoming less import dependent on China.