The EU and China both have grievances over their trade relations, but the way forward is through direct and frank dialogue, not sanctions or trade restrictions.

As the global order undergoes a turbulent era of transition from a unipolar world to a more diverse and complex security architecture, relations among the world’s major powers become crucial to maintaining global stability and prosperity. In this context, the relations between China and the world The European Union plays an important role in promoting peace and security in Greater Eurasia. The EU has faced unprecedented challenges over the past three decades: large-scale war in Eastern Europe, growing domestic polarization over migration and other issues, the negative impact of the crisis . the severance of economic ties with Russia and the stagnation of living standards. All of these developments are putting enormous pressure on the EU, leading to political and economic instability. The results of the European parliamentary elections in June 2024 proved that a growing number of Europeans were dissatisfied with the status. quo and demanded change.

Meanwhile, as competition among great powers intensifies, the issue of competitiveness takes center stage as a key pillar to guaranteeing security and stability. Recently, the European Commission commissioned Mario Draghi – former president of the European Central Bank, former Italian Prime Minister and one of Europe’s greatest economic minds – to prepare a report on his vision for the future of European competitiveness.

In the report published in September 2024, Draghi made a series of suggestions, saying that without serious and urgent measures, the EU could lose its competitiveness, putting the way of life of millions of Europeans at risk. Starting from the transatlantic productivity divide – due to the weakness of the EU’s high-tech industry – Draghi’s report recognizes that European companies were caught in a “mid-tech trap”. This means that most large European companies were active in mid-tech sectors and remained languishing there because they did not want to leave the field they knew. For example, the current difficulties of the German automobile sector clearly illustrate how this strategy is a loser.

In addition to internal reforms and investments in critical sectors, the EU needs a clear vision of its external economic relations. While relations with Russia are caught in geopolitical turbulence and mainly depend on the development of the crisis in Ukraine, where the EU has no decisive role to play, relations with other major economic powers, particularly with the United States and China, will be crucial to restarting the EU economy. The United States is a traditional ally of the EU, as many EU member countries are NATO members protected by American military power. However, in the economic sphere, the United States often acts not as an ally but as a competitor. In recent years, the United States has passed several laws, including the CHIPS and Science Act of 2022 – which authorized approximately $280 billion in new funding to boost domestic research and semiconductor manufacturing in the United States – and the Inflation Reduction Act of 2022 – which enhanced or created more than 20 tax incentives for clean energy and manufacturing. This legislation triggered a flow of capital from Europe to the United States, making the United States a more attractive place for investment.

At the same time, the United States proposed that the EU join its trade war with China and impose restrictive measures on economic relations between the EU and China. From the American perspective, a trade war with China, particularly restrictions on the export of high-tech products to China, such as advanced electronic chips, is part of the American strategy to contain the economic growth of China. From the US perspective, the negative impact on China will be greater if the EU joins efforts with the US.

However, with the EU already grappling with the knock-on effects of economic sanctions against Russia and the US taking steps to increase its economic competitiveness with the EU, the trade war with China will it benefit Europe? The most likely answer is negative. The EU should not simultaneously cut itself off economically from Russia and China. Europe’s largest export-oriented economies need export markets, and China is the largest export market for many high-profile European companies. Meanwhile, European companies must have access to China’s vast production base. Despite much talk about decoupling or de-risking China, many European companies still have close ties with China, and severing these ties will only make the European economy worse off.

It is well known that the EU has many concerns regarding its economic relations with China, including fair trade rules, access to Chinese markets and state subsidies for Chinese products, and these concerns need to be discussed and addressed. account. China also has its list of grievances against the EU. However, the only way to discuss and overcome these difficulties is through direct and frank dialogue, not sanctions or trade restrictions. As the EU seeks to increase its global competitiveness and China wishes to maintain its growth levels, mutual economic ties are assets, not liabilities, and must be nurtured, not destroyed.

The author is president of the Center for Strategic Political and Economic Studies in Yerevan, Armenia. The author contributed this article to China Watch, a think tank powered by China Daily. The opinions do not necessarily reflect those of China Daily.

Contact the editor at [email protected].