On Thursday, the European Union announced a tentative agreement with China to mitigate the recently imposed restrictions on critical exports of rare earth elements. These limitations have raised alarm in Europe, significantly impacting industries reliant on these materials, which play a crucial role in the defense, energy, and automotive sectors. The restrictions began in April amid escalating trade tensions with the United States, leading to a considerable strain on European companies dependent on these exports. Ursula von der Leyen, the president of the European Commission, emphasized the urgency of ensuring reliable supplies of critical raw materials from China to maintain trust in trade relations.
At a summit in Beijing, von der Leyen expressed cautious optimism regarding China’s proposal to expedite export licenses for rare earths, as well as the establishment of a new system aimed at addressing supply chain bottlenecks. This upgraded export supply mechanism is designed to facilitate immediate resolution of any issues that may arise. Despite these positive developments, von der Leyen underscored the necessity for more significant advances in balancing EU-China trade relations, which currently reflect a deficit of over €300 billion. She raised concerns that this figure could widen by 2025 due to decreased consumer demand in China and high tariffs imposed by the U.S.
In her discussions, von der Leyen highlighted two critical areas requiring immediate attention. The first pertains to the longstanding EU demand for greater access to the Chinese market, seeking parity with the access that Chinese firms currently have within Europe. The second area of concern is Beijing’s industrial overcapacity, fostered through substantial subsidies that enable Chinese manufacturers to sell goods at artificially lower prices, thereby harming international competition. Tensions reached a peak in October when the EU implemented duties on Chinese electric vehicles in response to perceived state aid advantages, prompting retaliatory investigations from Beijing into EU products.
Despite these significant issues, the summit yielded little in terms of concrete resolutions. Von der Leyen warned that without steps from China to address overcapacity, maintaining the EU’s current openness would be challenging. António Costa, the president of the European Council, echoed these sentiments by affirming the importance of establishing a mutually beneficial trade relationship and advocating for open dialogue in pursuit of shared solutions. He underscored the urgency of translating discussions into actionable outcomes.
The Chinese government’s responses following the summit conveyed a more optimistic portrayal, highlighting “new opportunities” in EU-China relations while cautioning against the EU’s potential trade measures. President Xi Jinping urged the EU to maintain an open market without resorting to restrictive practices and expressed disapproval of the EU’s efforts to reduce dependency on China, describing such actions as counterproductive. This divergence in perspectives illustrates the complexity of navigating future trade relations, as China perceives EU policies aimed at reducing vulnerabilities as measures that could lead to self-isolation.
Additionally, the summit fell short in addressing the pressing issue of Russia’s war on Ukraine, with the EU accusing China of acting as a facilitator by providing essential components for Russian weaponry. Although Beijing has denied these claims, it maintains a close partnership with Moscow. Costa articulated China’s pivotal role within the global context of the conflict, urging it to leverage its influence for fostering a ceasefire. Von der Leyen highlighted that China’s actions regarding the war will significantly impact future relations between the EU and China. The summit concluded with a consensus on climate action ahead of COP30, indicating a shared commitment to global environmental initiatives despite ongoing trade and political tensions.
