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EU trade manager confronts China with investment promises

A top EU official has frustrated China's trade policy in anticipation of a summit this week, as Brussels is struggling to persuade Beijing to fulfill its commitments that open up its market to European investment.

In an interview with the Financial Times prior to a meeting between the EU and Chinese leaders, EU Trade Commissioner Cecilia Malmstrom said on Tuesday that the block will not follow the US route to use punitive rates to try to force China to negotiate. European steel producers have been affected, among other things, by the additional duties that American President Donald Trump has imposed since taking office and Brussels has attacked the measures as a violation of the rules of the World Trade Organization.

But Malmstrom emphasized that Europe shared American indignation about the Chinese model of & # 39; massively & # 39; subsidized state-owned companies that expand abroad through takeovers.

A five-year attempt to negotiate an EU-China investment treaty is "not moving as fast as it should," Malmstrom said. "It has been going a long time and we had hoped that China would be more open to that. We have exchanged offers, which is a step forward, but they are very modest."

Brussels sees the treaty as the most direct way to deal with complaints from European companies that claim that they are being denied the investments and takeover opportunities of Chinese companies in Europe.

Pushed by Germany and France, the EU hardened its position towards Beijing last month, calling China a "systemic rival". Brussels intends to introduce legal instruments to combat takeovers by publicly supported groups and to tighten access to the EU public procurement market. The French leader Emmanuel Macron called it the end of "European naïve."

The EU's frustrations have been exacerbated by Beijing's opposition to include commitments to open markets in the communiqué that is supposed to have been adopted at Tuesday's EU-China summit in Brussels.

A senior EU diplomat warned that negotiations between European and Chinese officials had made little progress as Beijing stepped down "on a series of important issues", including mutual market access and WTO reform.

"This does not predict much good and is already a serious burden for the top," said the diplomat. "If China does not substantially change its negotiating positions and enter into a meaningful way, there will not be sufficient reason to reach agreement on joint statements."

Ms. Malmstrom said she hoped that trade negotiations between the US and China would lead to "systemic concessions" from Beijing, which would also benefit China's other trading partners, such as the EU.

US ambitions in the negotiations include stopping forced technology transfer from its companies operating in China – also an EU priority.

Although Brussels has welcomed trade negotiations between the US and China, it is wary of some details of the deal being negotiated. Washington & # 39; s efforts to persuade Beijing to buy more American products and take other steps to reduce its trade surplus are examples of "managed trade" policies that the EU claims to violate the spirit of the WTO system.

"If there is a return to managed trade, this is certainly not what we should look at in 2019 and that worries us," said Malmstrom. She added that "quotas, pre-decided" were not really part of the market economy, and we should not encourage that.

The biggest fear in Brussels is that the WTO system is coming under increasing pressure as a result of Chinese policy and the one-sided American retaliation. Beijing must show "leadership" at the WTO and join the efforts of the EU, the US and Japan to rewrite its rule book in a way that tackles the gaping loopholes exposed by China's economic model, including industrial subsidies, Malmstrom said. .

"We are talking to the Chinese in a very open and direct way – by saying that you have received a lot from WTO membership, you have promised many things… You said you would become a market economy, well then, you behave like a "she said.

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