Macron and Xi to arm-wrestle over EU-China trade tensions

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Good morning. Chinese President Xi Jinping has just arrived in Europe for his first visit in years, heading for France, Serbia and Hungary — but not Brussels. Read the preview by my colleague below. And our climate correspondent speaks to the head of Europe’s chemical industry body, who believes upgrading Europe’s old and creaky factories for the green transition will cost dearly.

Damage control

Chinese President Xi Jinping arrived in France yesterday for meetings to discuss the war in Ukraine, rising trade tensions with Europe — and cognac, writes Adrienne Klasa.

Context: Xi’s six-day visit is his first to Europe since 2019, and also includes stopovers in Serbia and Hungary later in the week. It comes at a time when relations between the EU and China are touchy, as many European countries seek to reduce their reliance on Chinese goods and fret over spying allegations.

During the meetings, French President Emmanuel Macron is set to address France’s desire for greater commercial reciprocity with China, and ask Xi to use his influence as Russia’s ally to move towards resolving the war in Ukraine.

Ahead of the visit, Macron told French newspaper La Tribune that an update of relations was necessary “because China now has excess capacity in many areas and exports massively to Europe”. But he noted not all European countries agree on this point, because “some players still see China as a market of opportunities”.

Today, Macron and Xi will be joined by European Commission president Ursula von der Leyen — a move meant to underline European unity.

Von der Leyen said before the meeting that an “oversupply of Chinese subsidised goods” such as electric vehicles and steel was “leading to unfair trade”.

“Europe cannot accept such market-distorting practices that could lead to deindustrialisation in Europe,” von der Leyen said. “I will encourage the Chinese government to address these overcapacities in the short-term.”

The commission has begun a litany of investigations into suspected unfair trade tactics by China, including a landmark anti-subsidy probe into Chinese EVs sold in the EU, expected to end in the coming weeks.

China has retaliated with its own probes into European goods. Macron is expected to focus on France’s cognac makers, after Beijing in January launched an anti-dumping investigation into French brandy imports.

“The question of cognac is the subject of the greatest attention on the part of the French authorities . . . This question will be addressed during discussions in order to ensure that French interests are preserved,” an Elysée official said.

With Xi expected to play hardball, it’s unclear whether the programme — which includes a state dinner this evening and an excursion to the Pyrenees tomorrow — can help ease the bubbling trade tensions.

Chart du jour: Yawning gap

Governments around the world are scrambling to figure out how to foot the immense bill for limiting climate change in line with the 2015 Paris agreement.

Old and rusty

Upgrading its industrial infrastructure will cost Europe dearly, the new head of the EU’s chemical industry body Cefic tells Alice Hancock.

Context: The cost of meeting the EU’s goal of net zero emissions by 2050 has become starkly apparent as the after-effects of Covid-19, the energy crisis and higher inflation bite. Brussels has estimated the investment needed to decarbonise energy systems alone to be €660bn annually.

Ilham Kadri, Cefic’s incoming president, said a huge part of the funds under the green transition would be needed for upgrading old plants and equipment, “without adding any capacity”.

“Europe has the oldest industrial infrastructure in the world,” said Kadri, who is also chief executive of the Belgian industrial materials manufacturer Syensqo. “It’s a cost of doing business.”

Concerns about the costs of a greener economy and whether European companies will still be able to compete in tight global markets have leapt up the agenda this year, in part pushed by Cefic, which masterminded an industrial declaration in February calling for a “European Industrial Deal” to complement the EU’s Green Deal climate policies.

The declaration has now been signed by more than 1,100 businesses, unions, think-tanks and industry groups.

Kadri said that central to her mandate at Cefic would be promoting the interests of smaller businesses, the suppliers and customers of large businesses such as Syensqo, which could little afford to upgrade their assets.

“We are nobody without the small- and medium-sized enterprises,” she said.

The crucial question, Kadri added, was whether companies could become “sustainable and profitable. It’s the power of the ‘and’, right?”

What to watch today

1. Danish Prime Minister Mette Frederiksen hosts migration conference in Copenhagen.

2. Lithuanian foreign minister Gabrielius Landsbergis speaks at conference on resisting economic coercion in Vilnius.

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