US-EU summit yields call for balanced approach to China, urging ‘constructive and stable relations’

Despite a cornerstone metals deal proving elusive at their Washington meeting, the allies agree Beijing is distorting the global steel market
Joint statement from summit encourages direct engagement with China on global issues like climate change and pandemic preparedness

China-EU relations

Finbarr Berminghamin BrusselsandIgor Patrickin Washington

Published: 10:08pm, 20 Oct 2023

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Unable to reach a deal that could have resulted in additional tariffs on Chinese metals products, the US and EU at their top-level discussion in Washington agreed to take a balanced approach towards Beijing seeking “constructive and stable relations”.

In the run-up to the transatlantic summit at the White House on Friday, a steel and aluminium agreement was being primed as the cornerstone achievement for US President Joe Biden in his meeting with European Council president Charles Michel and commission chief Ursula von der Leyen.

The key European demand was a permanent removal of all Trump-era tariffs on EU exports. In exchange, the US wanted the EU to investigate and place tariffs on “the sources of non-market excess capacity” – broadly read as shorthand for China, the world’s largest exporter of both products.

However, amid European concerns over complying with World Trade Organization rules and after the US floated a snapback clause that would allow tariffs to be reimposed, talks finished without a deal.

Both sides agreed that China was distorting the global steel market, but they did not align on how to tackle it in a legal manner. The joint statement pledged to continue discussions, ahead of a year-end deadline that would see the automatic renewal of tariffs frozen in a stopgap deal two years ago.

“The US cannot have it both ways: either we stick to a rules-based international trade order, then those rules must also apply to the US; or the US want to reserve the right to do to allies whatever they please, then they should drop the propaganda line about the rules-based order,” said Reinhard Buetikofer, the transatlantic spokesman of the Green group in the European Parliament.

Nor could the sides see eye to eye on a deal that would have given European exporters access to American green subsidies as part of its Inflation Reduction Act. The US insisted on a clause that would have required rigorous inspection of labour and environmental conditions at mines and mineral processing sites in Europe.

It has a similar “rapid inspection system” in other deals, but the EU balked at requirements that would have required full member-state approval.

Hopes of smooth US-EU summit hit snag over China-related trade issues

Meanwhile, Beijing’s move on Friday to slap export restrictions on a third critical mineral, graphite, was not discussed, although its controls on germanium and gallium provided a backdrop for transatlantic cooperation in the minerals space, sources said.

EU ambassadors ended up signing off on a joint statement on Friday morning in Brussels, with the section on China said to be a “compromise” between the Group of 7 text at Hiroshima in May and the European Council’s conclusions on China from June.

In the document released after the meeting in Washington, the US and the EU called for a balanced approach to China, advocating “constructive and stable relations” while expressing concerns over human rights and maritime tensions.

The leaders emphasised a need for direct engagement with China, especially on global issues like climate change and pandemic preparedness. They also urged China to help address debt sustainability for vulnerable nations.

Steel pipes stacked at an industrial park in Shenyang in Liaoning province. The US and EU have accused China of distorting the global steel market. Photo: Reuters

On the economic front, the statement declared no intention of “decoupling or turning inwards”, while pushing for a level playing field for Western businesses. The leaders stressed the importance of reducing supply-chain dependencies and protecting sensitive technologies, without stifling trade.

Maritime issues were also spotlighted, with the US and EU voicing strong opposition to unilateral changes by force in the East and South China seas. The statement reaffirmed a commitment to the one-China policy, but called for peace and stability across the Taiwan Strait.

The allies voiced “serious concerns” about forced labour in Tibet and Xinjiang Uygur autonomous region, and called on Beijing to respect its commitments to Hong Kong under the Sino-British Joint Declaration.

“Last summer, we committed to revitalising the partnership between the EU and the United States, and over the last two years we made good on that commitment,” Biden told journalists after the meeting.

China needs to take EU more seriously, bloc’s foreign policy chief says

“We stood together to support the brave people of Ukraine in the face of Putin's aggression,” he added. “And we stood together to tackle economic challenges, established standards to guide our relationship with China, and we’re standing together now to support Israel in the wake of Hamas’s appalling terrorist attack.”

With respect to the Middle East conflict, Biden cited language in the joint statement saying “there is no justification for terrorism” and supporting “Israel’s right to defend itself against these heinous attacks, in line with international law”.

China loomed large over the talks, with European officials sensing that it coloured the American approach to almost everything. “It was an absolute red line,” said one senior official of the negotiations on the China text.

Much as EU visitors to Beijing asked China not to view their relations with Europe through the lens of the US, so the same request was made of Washington.

American interlocutors were said to be unimpressed by the cacophony of voices in Europe on Beijing, particularly the visit to the capital by Hungarian Prime Minister Viktor Orban while negotiations were ongoing. There, the populist leader met Russian President Vladimir Putin, with images of the pair shaking hands drawing a furious reaction across the EU.

EU to investigate Chinese steel and aluminium sectors, with tariffs looming

On economic security, EU sources said the US pushed hard for a coordinated approach – particularly on outbound investment controls – but fell short. The statement separated the US approach from the EU’s, which stated it was “exploring” whether such measures would be required.

It would have been possible for Brussels to agree to more, given that the EU member states have not landed on a common position on the restrictions. The European Commission, its secretariat, is exploring a tool to screen private investments in 10 hi-tech sectors of the Chinese economy, with a proposal due before the end of the year.

Washington and Brussels also committed to enhancing joint efforts in artificial intelligence risk management and trustworthiness, building on a road map released in December to guide AI policies on both sides of the Atlantic.

The US and EU said they planned to endorse a G7 code of conduct for advanced AI systems and use AI for public good in areas like agriculture and emergency response.

These policies add to the growing number of AI regulations passed by the Biden administration in recent months.

Concerned about the use of technology in warfare, the US Department of Commerce on Tuesday imposed restrictions on the export of technology that can apply AI to the development of weapons of mass destruction.