EU Trade Chief Heads Into Beijing Talks With a $1 Billion-a-Day Deficit and Tougher Measures on the Table

The European Union's top trade official, Maroš Šefčovič, is in Beijing for two days of talks with Chinese Commerce Minister Wang Wentao starting Thursday, with the bloc in a noticeably tougher mood than it has been in years.

The problem Europe wants fixed

The EU's goods trade deficit with China has reached about 360 billion euros, or roughly $410 billion, which works out to more than $1 billion a day, the Associated Press reported. Šefčovič had given Beijing until October to show meaningful progress on narrowing it. Chinese customs figures cited by the AP show China's exports to the EU rose 15.3% in the first eight months of this year, while its imports from the EU grew 6.2%.

Many European politicians and economists see heavily subsidized Chinese goods as a threat to industries from steel to cars, especially since China redirected exports toward Europe and other markets after the U.S. raised tariffs. European Commission President Ursula von der Leyen has called it another "China shock," comparing it to the factory job losses the U.S. saw in the early 2000s.

Pressure from Strasbourg, Paris and Berlin

On Wednesday, the European Parliament voted 454 to 86 for a resolution calling for "economic reciprocity" and a proportionate EU response if China does not open its markets, according to the AP. France and Germany sent a joint letter urging a broad rethink of China policy, including making it easier to use the Anti-Coercion Instrument, a never-used set of powers for restricting trade and investment that is often called the EU's "trade bazooka."

Bloomberg reported that the EU is also preparing safeguard measures to limit imports of Chinese hybrid vehicles, a step Beijing may see as an escalation, though Brussels wants to avoid triggering retaliation. Not every member state is on board with a hard line: the AP noted that Spain has been friendlier toward Beijing, with Prime Minister Pedro Sánchez visiting four times in three years.

China's response

China's commerce ministry pushed back on the French-German letter, saying in a statement that "protectionism cannot enhance competitiveness." Ahead of the talks, Beijing opened an anti-dumping investigation into EU exports of p-nitrotoluene, a chemical used in dyes and medicines, after warning last month that it would retaliate against tougher EU trade measures.

Max Zenglein, an Asia-Pacific economist at The Conference Board, told the AP that China has largely withstood outside pressure so far and that Chinese investment in European factories is likely to be one of Beijing's bargaining chips, since EU countries are competing for new jobs and plants.