China and the European Union agree on a “mechanism” for export controls to ease trade tensions

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China and the European Union have agreed to set up a “mechanism” to discuss export controls, mirroring a similar effort between Beijing and Washington, as the two trading superpowers seek to ease rising trade tensions.

Beijing also agreed to buy more agricultural goods from the European Union and resolve issues including a license backlog for European infant formula makers after complaints about market barriers to its goods and services.

The moves indicate the two sides are ready to engage after warnings from European officials over relations, with EU Trade Commissioner Valdis Dombrovskis saying earlier on Monday that they risk splitting over issues such as unbalanced trade and the Ukrainian war.

“The two sides will establish a mechanism for dialogue in the field of export controls,” He Lifeng, head of President Xi Jinping’s economic team, said after his meeting with Dombrovskis, who is the European Commission’s executive vice president in charge of trade and economy.

The mechanism would allow “discussions and communication on… policies and practices,” he said.

The EU-China export control mechanism follows an announcement by the United States and Beijing in August that they would establish an “exchange of information on export control enforcement.”

Beijing has strongly attacked US-led efforts to limit sales of more advanced semiconductor equipment to China, which also involved manufacturers in Europe and Japan.

The EU counters that China also imposes export controls, recently imposing restrictions on its shipments of gallium and germanium minerals, which are essential for semiconductor production.

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The two sides said on Monday that they would study a “transparency mechanism” for the supply chain of raw materials.

“China wants to increase imports from the European Union and hopes that the European Union will remove restrictions on exporting high-tech products to China,” He said.

Dombrovskis said he raised the issue of legal uncertainty related to Chinese data laws, which European companies complain are too vague and burdensome, while attacking the European Union’s recent decision to launch an anti-subsidy investigation into Chinese electric vehicle imports.

Dombrovskis’ meeting with He, known as the China-EU High-Level Economic and Trade Dialogue, was the culmination of his five-day trip to the world’s second-largest economy.

Earlier on Monday, Dombrovskis told an audience in Beijing that China must change its ways or it will hurt investment and trade from the European Union.

“We stand at a crossroads. We can choose the path toward mutually beneficial relations,” Dombrovskis said in a speech at Tsinghua University. “Or we can choose the path that slowly divides us. The shared benefits we have enjoyed in recent decades are weakening and disappearing.

In his speech, he noted that China’s economic success is built on globalization, with consumers in the European Union buying goods that have lifted hundreds of millions out of poverty.

But the Latvian official warned: “Both the EU and China face significant political and economic headwinds. Some of these headwinds may cause us to drift away.”

The strongest headwind was China’s failure to condemn Russia for its invasion of Ukraine. Dombrovskis said Beijing supports the territorial integrity of countries, “so it is very difficult for us to understand China’s position on Russia’s war against Ukraine, because it violates China’s basic principles.”

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He said the anti-subsidy investigation into imports of battery electric vehicles from China would be transparent and fair, and could be followed by other investigations if China does not provide a “level playing field.”

Dombrovskis’s position, and his criticism of the record 396 billion euro trade deficit between the EU and China, has brought Brussels closer to the tougher position of the United States.

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