Apologies for the second update today, I wasn’t expecting China and the EU to announce these understandings so soon. The two sides have just concluded the second meeting of the China–EU Trade and Investment Consultation Mechanism.
From the perspective of China’s concerns, the agreement to hold a technical dialogue on the EU’s Foreign Subsidies Regulation (FSR) is a notable development. By contrast, the inverter issue appears not to have been fully resolved. Although the EU clarified its position, the reference to further consultations suggests that differences may remain.
The proposal to continue exploring possible tariff reductions on certain goods is also intriguing and worth watching. For now, however, the language remains exploratory; need more time to see whether it leads to concrete arrangements.
On hybrid vehicles, the wording is:
The two sides reached an understanding on trade in hybrid vehicles in a manner consistent with WTO rules.
On rare earths, the two sides reached a mutually beneficial arrangement: China will continue to provide a “green channel” to expedite approvals for rare earth exports to the EU, while the EU will reciprocate by helping resolve priority individual licensing cases involving exports of dual-use items to China. My guess is that some of these cases involve the Dutch semiconductor sector. ASML has explicitly disclosed that its TWINSCAN NXT:1970i and 1980i DUV immersion lithography systems require export licenses from the Dutch government. Early last year, the Dutch government also brought certain semiconductor inspection equipment in export licensing list, with applications assessed on a case-by-case basis. Facilitating approvals for equipment supporting older DUV systems would be some progress.
On market access, China will expand imports of EU medical devices and hold a procurement matchmaking event during the China International Import Expo.
Below is the Chinese readout.
List of Agreed Outcomes
Trade and Investment Balance
The two sides will continue to explore the possibility of reducing tariffs on certain goods within the framework of World Trade Organization (WTO) rules.
The two sides will continue to strengthen communication and cooperation under the trade monitoring mechanism and make further active use of dialogue mechanisms to enhance mutual understanding.
Following intensive consultations, the two sides reached an understanding on trade in hybrid vehicles in a manner consistent with WTO rules.
The two sides recalled the guidance document on price undertakings in the countervailing duty investigation into electric vehicles and will continue the relevant procedures concerning company-specific price undertakings and reviews in that case.
The two sides will maintain dialogue on market access for medical devices. The EU side welcomes the measures taken by the Chinese side to expand imports of EU medical devices, including the organization of a procurement matchmaking event during the ninth China International Import Expo.
On the basis of risk assessments, the Chinese side will expedite work to recognize the application of the regionalization principle to eligible EU Member States. The two sides agreed to exchange information on methods and technologies for animal disease prevention and control and jointly explore ways to lift bluetongue-related restrictions on exports to China from the relevant Member States.
The two sides agreed to continue technical exchanges on computer reservation systems. They also agreed to hold further consultations on their respective regulatory frameworks for cosmetics and pharmaceuticals to further address existing and emerging market access issues.
The two sides agreed to hold a technical dialogue on the EU Foreign Subsidies Regulation (FSR).
The EU side clarified that its financing guidance for inverter projects does not target any specific country. The two sides will hold further consultations on this issue.
The two sides agreed to explore investment cooperation to promote their respective economic development and to discuss future-oriented cooperation.
Export Controls
The two sides reaffirmed the need to further strengthen the China–EU export control dialogue and welcomed enhanced communication and exchanges on their respective export control policies, including through the publication of policy guidance, the organization of government–business exchanges, and the provision of training.
The two sides agreed on the importance of enhancing the predictability and stability of global industrial and supply chains. The Chinese side is willing to continue facilitating the approval of export licenses for rare earths and permanent magnets destined for the EU through a “green channel” mechanism. The EU side will continue to work with its Member States to facilitate the resolution of priority individual licensing cases concerning exports of dual-use items to China.
The two sides reaffirmed their commitment to addressing concerns in the area of export controls and discussed the possibility of exploring structural facilitation measures for compliant trade in dual-use items between China and the EU.
The two sides reached an understanding under the export control dialogue mechanism to provide advance notification before making additions to control lists, enhance the transparency of listing and delisting procedures, and support the initiation of delisting procedures within their respective legal frameworks.
Intellectual Property
China and the EU have begun addressing systemic intellectual property issues and have made progress. The two sides agreed to continue working together to resolve the relevant issues and to set interim targets, focusing on effective and fair intellectual property protection and enforcement, as well as greater transparency and predictability. They agreed to monitor progress through the China–EU Intellectual Property Working Group.
WTO Reform
The two sides agreed to further strengthen bilateral communication and cooperation on WTO reform in an open and constructive manner. They committed to engaging in WTO reform and agreed to discuss all relevant issues with a view to achieving substantive progress.