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Trade Tensions Rising Between China and the EU

Temperatures are rising between Beijing and Brussels, as talks over an investment treaty have broken down. The Chinese are unhappy over EU plans to tighten wireless technology security, and China has warned that this could affect Chinese investment in the EU.
Kenny Fisher

It has been a year marked by difficult trade disputes and friction between trading partners across the globe. The Trump administration, in keeping in with its mantra of ‘America First’, has aggressively pushed its trading partners into negotiating new trade accords which are more favorable to Washington. This has included a new North American trade deal, a limited trade deal with China, and a warning to the European Union that it could face tariffs as well.

Given the combative stance coming out of Washington, one might have expected China and the EU to strengthen their trade links. The EU and China have commenced talks on a new investment treaty, but rising trade tensions between the two sides have hampered progress. The distrust between the sides as escalated to such a degree, that earlier in the year, the EU labeled China a ‘systemic rival”.

A major irritant in trade relations between China and the EU (and the United States). has been the actions of Huwaei, the Chinese telecom company. In May, the U.S. put Huwaei on its trade blacklist, over concerns that China was using Huwaei wireless technology equipment to spy on the U.S. The EU is trying to strengthen its security rules regarding wireless technology, which could affect Huwaei. The Chinese have been swift to respond. Zhang Ming, China’s ambassador to the EU, has said the EU that trade relations between the two could suffer if the EU fails to “keep to the principles of multilateralism and free trade”. In a warning to Brussels, Ming said that any unwelcome changes or developments by the EU could chase away Chinese companies looking to invest in Europe.

Clearly, the Chinese government is willing to curtail investment in Europe if it is unhappy with EU trade policy. EU countries, hungry for foreign investment to help prop up sagging economies, could risk losing significant Chinese investment if they fail to placate Chinese sensitivities.

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