Free trade between China, EU key to globalized world

Spanish Prime Minister Pedro Sanchez visited China from Sept 8 to 11. In Beijing, he met with President Xi Jinping, Premier Li Qiang and Chairman of the Standing Committee of the National People's Congress Zhao Leji. Sanchez inaugurated the ninth Spain-China Forum and the Spain-China Business Advisory Council during his visit.

According to a Spanish government news release, during Sanchez's meeting with President Xi on Sept 9, Sanchez "stressed that, in matters on which the positions of Spain and China do not fully coincide, Spain will maintain a constructive willingness for dialogue and cooperation, emphasizing the country's commitment to developing a positive agenda and seeking consensual solutions that benefit all parties, including Europe". Furthermore, eight agreements were signed, reaffirming the two countries' commitment to working together in favor of green development, bilateral trade and investment, initiatives for the promotion of culture, education and scientific research.

While this year marks the 51st anniversary of the establishment of diplomatic relations between China and Spain, this is Sanchez's second trip to China in less than two years — the previous one being in March 2023. This is not a random fact. According to data from China's Ministry of Commerce, China is Spain's largest trading partner outside the eurozone.

Data from the Observatory of Economic Complexity shows that in 2022, Chinese exports to Spain were worth $47 billion. The major goods to be exported were semiconductor devices ($3.29 billion), broadcasting equipment ($2.07 billion) and electric batteries ($1.81 billion). China's exports to Spain have increased at an annualized rate of 12 percent, from $26.7 billion in 2017 to $47 billion in 2022. On the other hand, in 2022, Spain exported $8.51 billion worth of goods to China. The main exports from Spain to China were copper ore ($1.2 billion), pork ($1.05 billion) and packaged medicaments ($620 million). Spanish exports to China increased at an annualized rate of 4.38 percent from $6.87 billion in 2017 to $8.51 billion in 2022.

Thus from a trade and commerce perspective, Spain and China have a close and strong relationship.

As I mentioned earlier, Sanchez's visit to China was no random coincidence. Recently, the European Union proposed import tariffs on Chinese-made electric vehicles, a measure that was supported by Spain.

Now, EU member states are due to vote in October on whether to adopt these additional duties of as much as 36.3 percent on Chinese EVs, to which China has responded by launching anti-dumping investigations into imports of pork and dairy from Europe. As mentioned before, pork is the second most exported Spanish product to China.

Sanchez said during his trip to China that the EU should reconsider these proposed import tariffs on Chinese-made EVs, and urged Brussels and Beijing to find a compromise to avoid a trade war.

At an event in an industrial park in the Chinese city of Kunshan, Jiangsu province, Sanchez mentioned that "I have to be frank, we have to reconsider our position, all of us. Not only the member states but also the (European) Commission".

"We don't need another war, in this case, a trade war. I think we need to build bridges between the European Union and China, and from Spain we will be constructive and try to find a compromise between China and the European Commission," he said.

While differences will remain between China and the EU, the truth is that there are more synergies than differences, and both parties should focus on these synergies and common interests to build an enhanced mutually constructive relationship.

Nevertheless, leaving some differences aside, meetings between leaders from EU countries and China are always good news.

Given that the United States and China are the world's two biggest economies, and given the fact that in today's globalized world, they are undoubtedly intertwined, it is vital and crucial for both countries to cooperate as much as possible.

The same could be applied to EU-China relations: given that China is the world's second-largest economy, and that the EU, as a bloc, is the third-largest economy in the world, accounting for one-sixth of global trade. Both parties should have a frank and cooperative relationship. According to European Commission statistics, China is the EU's second-largest trading partner for goods after the US, while China is the EU's third-largest partner for exports and the biggest for imports.

While the EU considers that reciprocity, achieving a level playing field and addressing asymmetries in the relationship are matters of priority in today's globalized world. The EU and China are undoubtedly intertwined and it is vital and crucial for both countries to cooperate as much as possible. It is also true that they will compete in certain areas, but the most important idea must be that of cooperation rather than competition.

To sum up, from the standpoint of Sino-Spanish relations, Sanchez's visit shows once again the importance of relations between Spain and China. From the standpoint of EU-China relations, a trade war should be avoided. The US-China trade war started in 2018 under the Donald Trump administration proved harmful not only for both the US and China, but also for the world. An EU-China trade war would not benefit anyone. As mentioned by Sanchez, the EU should reconsider proposed import tariffs on Chinese-made EVs, and Brussels and Beijing should find a compromise that avoids a trade war. Protectionism and bilateralism instead of free trade and multilateralism can never be the solution.

Given that China is the world's second-largest economy and the EU is the third one, and given that we are living in a globalized world, it is imperative for both parties to keep enhancing a mutually constructive and stable relationship. Not just trade, but in every possible way such as tourism and exchange students, since closer relationships between Spain (and the whole EU) and China will not only benefit both parties, but the whole world.

The author is a fintech adviser, researcher and former business analyst for a Hong Kong publicly listed company.