00:00The other big point in the summit that is now underway is China.
00:04The Europeans have given themselves a month now, the end of October,
00:08to cut a deal that shows that Chinese will commit to rebalance a trade deficit
00:13that is incredibly problematic, that is putting the European industry
00:17under an incredibly difficult situation, a billion euros a day running that deficit.
00:22Now, the Europeans have cut the beginning of a deal that will limit the imports of hybrid vehicles.
00:29Chinese hybrid vehicles into the EU, but there is much more on the table.
00:34And to debrief, I spoke with one of the smartest voices on China.
00:38He is the author of the influential news that are watching China in Europe, and that is Noah Barkin.
00:43And I began by asking him, are there signs that a deal is finally possible, or do we head to
00:49a trade war?
00:50Let's take a look.
00:50This is a deal on hybrid vehicles in which China has agreed to accept EU measures to limit Chinese exports.
01:04I think if you look at it, it's a good sign, right?
01:07It shows an openness on China's part to compromise with the EU, to open a dialogue with the EU.
01:18But it's really just a drop in the bucket, right?
01:20So I think leaders will say this, welcome this deal that was clinched in Beijing.
01:26But at the same time, we'll be saying that the Commission needs to move forward and can't wait until March,
01:33the next meeting, to take measures.
01:36And what you say is, it's a move in the right direction.
01:39Can we call it a win for the Europeans?
01:41But certainly just the start of the story, if I understand correctly.
01:44Yeah, I mean, I think it's a small win because Europe, arguably for the first time, has really used the
01:55leverage that its single market provides it with in order to win concessions from Beijing.
02:04But this is a structural problem.
02:07China, China limiting exports on hybrid vehicles is not going to address a much deeper problem, which runs from hybrid
02:16vehicles to chemicals to machine tools.
02:19You talked about the size of the deficit, 1 billion euros per day.
02:25Obviously, hybrid vehicles is not the final solution to this deal.
02:29And how aligned are or is the European Commission, the European leadership, and in particular, the European industry?
02:37Honestly, I think we have more unity between the Commission and the member states than we've had in many years
02:46on this.
02:47And that's mainly because Germany, over the course of the summer, has really moved.
02:52And I think we haven't really appreciated the significance of this movement.
02:55I think some of us who have been following a German-China policy for years, you know, there's always a
03:01bit of skepticism about whether this, you know, how this will end.
03:06But I think the movement in Germany has been substantial.
03:11You have a group of countries, including France, including the Netherlands, including Italy, along with Germany now, that are supportive
03:22of bolder measures.
03:23I think in industry, it's very divided, right?
03:26You have movement in industry calling for more protection.
03:31But at the same time, there is that big concern about Chinese retaliation if it gets really hot.
03:38I spoke with the Spanish foreign minister this week.
03:42They have given no indication that their China policy will change.
03:45You know as much as I do that they are perceived as a weak link when it comes to this
03:50tougher China policy from the rest of the European Union.
03:52How much do you worry?
03:54Does it really change anything, Madrid's position when it comes to this big negotiation?
04:01Well, I think if you have Germany and France and Italy and Poland and the Netherlands on one page,
04:09it's hard for me to believe that Pedro Sanchez is going to want to be isolated in this debate.
04:18So, I think you're absolutely right, Maria, that Spain has sort of carved out a niche for itself.
04:24It's been very aggressive in seeking Chinese investment.
04:29Chinese investment has been flowing to Spain.
04:32But at the same time, I would question whether Spain would want to be on the wrong side of this
04:40debate.
04:40And, of course, we do have an election coming up at the end of November in Spain.
04:44And what happens after that will be interesting to watch as well.
04:47It's a final point, Noah.
04:48The big question is, will there be Chinese retaliation?
04:53They have at times hinted at that.
04:55Is the European Union prepared?
04:57Does it have the instruments to ultimately fight a trade war?
05:01Because that is a possibility.
05:03Well, I would say that China has escalation dominance in the short term through its control of rare earths and
05:11magnets.
05:13China could, in theory, close down production in German car-making plants, for example, within a few months, probably.
05:25But at the same time, Europe has, in the medium term and long term, has a lot of leverage.
05:30The Chinese economy is very weak domestically at the moment.
05:35China is heavily dependent on exports.
05:38The European market is the biggest, most open market in the world for Chinese goods.
05:43So the calculus in European capitals right now and also in the European Commission is that China doesn't want to
05:53escalate this either, right?
05:56So that, I think, was the thinking behind the Sefcovich visit and the deal on hybrids.
06:01You talk with Beijing, you try to move forward on some of this trade defense, but you don't escalate it
06:09to the point where China feels the need to retaliate really aggressively with rare earths.
06:17Well, thank you to Noah Bargian, watching Europe, watching China in Europe.
06:21What a fascinating conversation and what is one of the most consequential topics for the European Union and, frankly, for
06:28a lifetime.
06:29The question of can we rebalance a trade relationship with the Chinese goes to the heart of the industrial policy
06:35in Europe and, therefore, European jobs.
06:38That negotiation and that deadline continue and we continue to monitor it on Euronews.
