With all of the attention the trade relationship of China and the United States is receiving, China’s dynamic with the European Union from a trade perspective tends to be less discussed. However, this doesn’t stop the European Union from being China’s main trading partner or China from representing the second trading partner of the European Union by volume (behind the United States).
With a daily trade average that exceeds $1 billion, China represents the EU’s top import source (with the European Union primarily importing consumer/industrial goods, machinery and clothing/footwear) and its second-largest market for exports according to the European Commission (with the European Union primarily exporting machinery, chemicals and vehicles/aircrafts).
As is to be expected, the European Union has a trade deficit with China. However, in light of the fact that the EU’s trade balance is positive after drawing the line and factoring in its other export markets, this deficit isn’t as big of a burden on the relationship between the two giants as is the case with the United States.
However, this doesn’t mean the European Union isn’t concerned about a series of aspects pertaining to its dealings with China. For example, transparency-related problems and respecting human rights, an excessive involvement of the state in the economy (although, frankly, the EU is not exactly in an exquisite position to lecture on this), lack of access to the Chinese marker for foreign product and service providers and significant issues when it comes to the protection of intellectual property rights (also a major problem from the perspective of the United States).
Furthermore, the strategic partnership between the European Union and the United States is also an aspect that needs to be taken into consideration. While there have not been firm public pressures from the US to limit trade with China at this point, it is important to realize that in light of long-term investments the United States has made in Europe when it comes to defense (with, let’s face it, NATO hardly being the force it is today without the US as its largest contributor by far), there is a likelihood that this may change. Especially if we factor in the continuous pressure being made by the United States for NATO members to respect their pledge of spending 2% of their GDP on defense, something European Nations have made the habit of falling behind on.
As can be seen, the main threats to the China – EU relationship are political in nature.
All things considered, however, the numbers speak for themselves. In light of the increased dependence of the EU on China’s imports, corroborated with China’s aggressively-growing internal consumption that is likely to boost it from position #2 to position #1 as an export market for the European Union, the economic incentives associated with maintaining a strong trade relationship and even taking things several steps further tend to be greater than the previously-mentioned political challenges.
Two players on the international scene defined by pragmatism rather than emotionally-charged rhetoric, China and the European Union will most likely continue their “Realpolitik” tango, unless scenarios unfold in which the European Union is essentially made to choose where its loyalties lie.