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China’s trade surplus with Europe soared during the pandemic as Europeans bought more goods such as personal protective equipment or electronics to allow working from home. From 2020 to 2022 the surplus more than doubled, hitting $277 billion last year. That has since narrowed somewhat as European demand has cooled, with the surplus falling to $19 billion last month, according to Chinese data released Tuesday.

The statement by Dombrovskis echoes that of French Finance Minister Bruno Le Maire, who recently said in Beijing that his nation was looking to “get better access and more balanced access to the Chinese market.” Former US President Donald Trump was also highly critical of the deficit with China, with the trade deal signed in January 2020 meant in part to address that imbalance.

https://www.bnnbloomberg.ca/china-says-europe-s-soaring-trade-deficit-is-its-own-fault-1.1956373

I am asking, because France and China just signed a lot of trade deals that would benefit them both, and now the EU, which is supposed to also represent France is playing tough ball with China, so who does the EU represent and why can the EU have a different approach to other European countries if it represent them and how "fully" do they represent them?

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    Can you tell us what trade deals between China and France you are referring to which they just signed? Looking at recent news reports about "China France Trade Deal" only gives me reports about "EU China trade deals"
    – Philipp
    Aug 11, 2023 at 9:05
  • 12
    France can't sign a trade deal with China, that is absolutely against all the rules of EU.
    – James K
    Aug 11, 2023 at 13:45

4 Answers 4

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The imports and exports of EU countries are strongly regulated by the EU. The reason for that is the European Single Market. The EU is basically one big free trade area. Goods, services, people and capital can move freely between EU countries with no further restrictions. That means that any good that can be exported to or imported from one EU country can de-facto be exported to or imported from any EU country.

That means that any trade agreements regarding what kind of trade is permitted with the EU single market have to be made on the EU level. Not on a national level.

But what national governments can of course still decide bilaterally with other countries is:

  • State consumption. For example, if the French government wants to buy a million widgets to put one on the desk of every French government official, then they can of course enter negotiations to buy those from the Chinese government and then import them (following the EU regulations for widget imports, of course).
  • Property ownership. If a Chinese company wants to buy part of a German harbor, or if a French company wants to build an airplane part factory in China, then that might require the permission of the national governments, but not the EU. But how to actually utilize those properties for international trade with the EU would then be subject to EU regulations.
  • Statements of intentions to lobby the EU. For example, France might make an agreement with China that they are doing a best effort to use their influence in the EU to get the trade restrictions on widgets removed. Which might or might not be successful, depending on what the other EU members think about that.

But to answer the original question "Who does the EU represent when negotiating with other countries on trade?": The EU represents the interests of all the European Union member countries. But the 27 EU countries don't always have the same interests and don't always agree on everything. So there are often situations where the interests of the EU as a whole and the interests of individual member countries do not align. How the EU deals with such conflicts of interest would be a topic for another question.

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The EU has the exclusive right/duty to negotiate trade agreements for all Union members. Getting out of that means something like Brexit, getting out of the Union.

International economic relations involve more than just trade. Industrial policy and economic development are national issues, subject to coordination and oversight by the EU. If a country wants to negotiate a complex deal with China building a highway or a seaport, national and regional governments are at the table.

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The EU is (among other things) a customs union, it has a common external tariff and an extensive set of technical rules on what may or may not be exported and imported. In general, it works that way:

  • Member states are not allowed to negotiate separate trade agreements or even choose not to implement existing agreements. For example, the EU Commission can and does sue member states (in front of the EU Court of Justice) to force them to collect duty when they disagree with their interpretation of the rules.
  • The EU negotiates on the member states' behalf. It's the only entity negotiating trade agreements with third countries (i.e. non-EU countries). France cannot sign a new trade agreement with China that hasn't been negotiated by the EU.

The member states do have significant input on the agreements the EU negotiates. In practice, EU Commission staff negotiates with other country but only around parameters agreed in advance by the member states and detailed in a “negotiating mandate” approved by the EU Council. To depart from this, the Commission has to go back to the Council and find agreement with the member states. Then, when all is said and done, any new agreement must be ratified by each and every member state according to their own procedure, which may even involve ratification by a regional parliament or a popular vote.

In other word, the “deals” you heard about are not trade agreements. The French state or French private entities might of course buy stuff in China but those are just regular contracts that will have to obey EU and Chinese customs rules (and a bunch of other stuff too). Of course, they are also many small exceptions (e.g. for overseas territory) and special rules (e.g. export licensing for sensitive technology), some of which stem from each country's accession treaty.

Note that French presidents have long been in the habit of traveling abroad with a number of CEO of large French companies, some of which are partly owned by the French state. They make a point of finalising big contracts or investments during such trips and to claim some credit for it but those are not separate agreements.

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A number of examples have been given of what a EU country can do in external trade relations. A class not mentioned so far are private deals with monetary state involvement ("aids granted by states"):

  • A Chinese company buys a french factory site and invests in new production equipment. The French government subsidises the investment in exchange for guarantees by the Chinese company to not downsize the workforce for at least five years.

  • A French company builds a new factory in China. The French government grants a surety on the loans for the investment in case the sales on its products fail to materialize.

Both deals are dependent on approval by the European Commission (to ensure it complies with the Common Rules) or the European Council (in cases where it unanimously wants to derogate from the Rules), but the EU is not party to the contract signed.

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    This seems incidental to the question. Does it matter whether the factor is China is involved at all? For example, in the factory investment scenario, state aid rules would also apply if the buyer was French or German.
    – Relaxed
    Aug 11, 2023 at 16:15
  • @Relaxed Formally, you are right. Maybe my examples were not well enough choosen, I went for some I read about in recent times. The point I wanted to make is that such a deal may well be reported as a "Chinese-French trade deal" in the press.
    – ccprog
    Aug 11, 2023 at 16:23

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