On October 23rd, the South China Morning Post in Hong Kong reported that the original title: Blaming China for the trade deficit, the EU was the wrong target. Now in Brussels, complaining about the EU's trade deficit with China seems to have become a fashion trend. China is the second largest trading partner of the European Union after the United States, with a bilateral trade volume of 847.3 billion US dollars in 2022. In the same year, China's trade surplus reached a record high of 276.6 billion US dollars. Brussels attributes this' trade imbalance 'to the lack of openness in the Chinese market. The EU's concern about its huge trade deficit is understandable, but it overlooks the root cause. In fact, China's trade surplus is the result of the interaction of market forces.
Firstly, part of the reason is China's manufacturing strength - not only for Europe, but also for other countries around the world. Just look at the bilateral trade between China and the United States, and you will have a deep belief in the competitiveness of China's export machinery. Secondly, China's trade surplus may also be related to the weakening competitiveness of the European Union. According to data from the Ministry of Commerce, from 2019 to 2022, exports from other countries to China increased by 35%, while exports from the European Union to China only increased by 3.2%. Therefore, the EU's share in Chinese imports has decreased from 13.3% to 10.5%. Due to China's failure to take any restrictive measures against the EU during this period, the decline in EU market share may indicate that the EU has lost its international competitiveness.
In response to the dissatisfaction of the European Union, China has recently agreed to increase efforts to improve market access for some EU products. But if some key factors behind the deficit are not addressed, trade imbalances cannot be significantly improved. At present, the EU's efforts to export more goods and services to China are hindered by its own strict export controls. The EU has a vast list of dual-use products and technologies that must be approved before being exported to China. Many of these product technologies have a ready market in China, which is where the EU enjoys a competitive advantage. Therefore, the EU's export controls have caused damage to its export sector's "crown jewels" and dealt a blow to exports to China. However, Brussels does not even acknowledge this as a factor contributing to trade imbalances.
The EU is increasingly placing geopolitics and values above commercial interests. After China took some countermeasures against EU sanctions, the European Parliament temporarily suspended the approval of the China Europe Comprehensive Investment Agreement. The agreement addresses most of the EU's concerns regarding market access. But as is well known, politicians in Brussels sacrifice trade for their values and ideologies.
In fact, the geopolitical game of the EU and the rising trade protectionism are likely to determine the contours of its trade with China. Brussels opposes positioning the EU from the perspective of competition between China and the United States, but has always followed Washington, including banning Huawei's 5G equipment and restricting the sale of advanced semiconductor technology to China. At the request of Washington, the European Union also plans to announce a countervailing investigation against Chinese steel companies - this will only curb the EU's trade expansion.
The EU's "risk reduction" strategy will ultimately lead to a reduction in trade. Will Beijing respond similarly when Brussels sees interdependence between China and Europe as a risk? At the same time, trade protectionism is on the rise in Europe. Brussels launched a countervailing investigation into Chinese made electric vehicles, which China considers to be a blatant act of protectionism. If the investigation leads to punitive tariffs, China will have no choice but to retaliate and defend its own interests. Such actions will exacerbate trade conflicts and further undermine the EU's efforts to introduce more goods into China.
Obviously, blaming the trade deficit with China on insufficient market access is the wrong target for the EU. To address trade imbalances, the EU needs to shift its focus to the root cause, increase productivity, and not politicize economic and commercial issues. (Translated by Zhou Xiaoming and Chen Jun'an) ▲