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EU Balks at Calling Out China in Joint Trade Strategy With US

(Bloomberg) -- The European Union stripped out explicit references to China as a non-market economy in its joint trade strategy with the US.

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In a negotiation that highlighted lingering hesitations over Washington’s more confrontational approach to China, EU nations agreed on a watered-down text of joint conclusions from a meeting of EU-US Trade and Technology Council in northern Sweden that starts Tuesday, according to people familiar with the matter. The document is still awaiting US signoff.

Several references to China were removed after a number of EU countries objected to earlier drafts. The newest version, obtained by Bloomberg, also softens earlier language where the two sides planned to agree on aligning their approaches for screening outbound investments.

The near-final text highlights that while EU countries are becoming tougher on China — embracing the idea of “de-risking” as laid out by European Commission President Ursula von der Leyen this spring — they’re still not willing to adopt the more hawkish US line. Countries like France and Italy in internal meetings pushed against various references targeting China’s economic practices, said the people, who asked for anonymity to discuss sensitive negotiations.

Read more: China Targeted in New G-7 Push Against ‘Economic Coercion’

Earlier drafts sent at the end of last week specifically called out China’s “anti-competitive and harmful non-market policies and practices,” particularly in the area of more mature semiconductors. The newer draft omits any specific mention of China.

The US also wanted to call out China and Russia for “economic coercion.” The newest version mentions the problem but avoids calling out the two countries.

Some EU countries were also upset that language on outbound investment controls went further than that agreed at the Group of Seven summit earlier this month. The US saw the G-7 agreement as a floor to build upon, while for most in the EU it was a ceiling, the people said. The final text is in line with the G-7 wording.

Originally, the US and EU wrote they have an “interest in preventing the narrow set of technological advances that are assessed to be core to enhancing the military and intelligence capabilities of actors who may use these capabilities to undermine international peace and security, from being fueled by our companies’ capital, expertise, and knowledge.”

Read more: US Push for Controls on Investment in China Hits EU Resistance

The final draft now says they “recognize that appropriate measures designed to address risks from outbound investment could be important.”

US Secretary of State Antony Blinken, Commerce Secretary Gina Raimondo, and US Trade Representative Katherine Tai are representing Washington in the trade meeting, which is being held in Lulea, Sweden, on Tuesday and Wednesday. The EU side is being represented by commission vice presidents Margrethe Vestager and Valdis Dombrovskis, as well as Internal Market Commissioner Thierry Breton.

EU countries have long resisted US pressure to turn the TTC into a forum overly focused on China.

This will be the fourth installment of the bilateral trade and technology meetings that include discussions on telecom infrastructure, semiconductor subsidies and electric charging for automobiles.

Tensions arose at previous meetings after a dispute over a US submarine deal and later the US’ subsidies to incentivize clean-tech investment, but the debate this time is clearly more centered on China.

--With assistance from Alberto Nardelli.

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