EU leaders call for end to 'naivety' in relations with China

BRUSSELS (Reuters) - European Union leaders called for an end to naivety on Friday in relations with Beijing and said China was a competitor whose markets were not sufficiently open, although they did not spell out specifically what they planned to do.

French President Emmanuel Macron holds a news conference after a European Union summit in Brussels, Belgium March 22, 2019. REUTERS/Eva Plevier

The bloc has sought to avoid taking sides in a multi-billion dollar trade war between Washington and Beijing.

But it has become increasingly frustrated by subsidies and state involvement in the Chinese economy, and what it sees as a slow pace of opening up. It plans to raise these issues at an EU-China summit on April 9 after years of granting China almost unfettered access to EU markets.

French President Emmanuel Macron, among the most vocal EU critics of Beijing, said that he recognized there was a divergence of views in the bloc but that letting Chinese companies buy up EU infrastructure such as ports had been a “strategic error”.

“The period of European naivety is over,” Macron told a news conference.

“The relationship between EU and China must not be first and foremost a trading one, but a geopolitical and strategic relationship,” he said.

German Chancellor Angela Merkel said Europe should consider China as much a competitor as a partner, a view echoed by her Austrian counterpart Sebastian Kurz and European Commission President Jean-Claude Juncker.

EU leaders had been intending to discuss China on Thursday at their summit, but their schedule was blown off course by a long day of talks over how to deal with Britain and its looming departure from the bloc.

The discussion on China was long, but did not produce a formal conclusion.

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The goal of presenting a united front on China was complicated by a simultaneous visit by Chinese President Xi Jinping to Italy, whose euroskeptic government was due to sign an accord drawing the country into China’s giant “Belt and Road” infrastructure plan.

Other largely eastern EU countries have also signed up to the plan.

Italian Prime Minister Giuseppe Conte said other EU leaders did not appear to have a problem with Rome’s Belt and Road plans. Italian officials said Rome would comply with EU rules, such as on fair procurement and the environment.

“As far as he explained it, I have nothing to criticize for now, but have already discussed that it is even better if we act together,” Merkel said.

Brussels, like Washington, is questioning why China is regarded under World Trade Organization rules as a developing country given special treatment, while being on course to become the largest economy in the world.

“We need fair rules and naturally also protection for intellectual property and know-how from Europe and proper treatment of our investors in China,” Kurz said.

In signs the European Union wants to end unfettered access to Chinese business, it is about to introduce a system to screen foreign investments, particularly those affecting vital infrastructure or technology.

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The European Commission, which coordinates trade policy for the 28 member nations, has also urged leaders to back its plan to limit access to EU public tenders worth 2.4 trillion euros ($2.7 trillion) to companies from countries whose procurement markets were not open.

Pro-free trade countries such as the Nordics and the Netherlands say the plan could unfairly restrict commerce and amount to a surcharge for taxpayers by shutting out cheaper providers.

The EU leaders also discussed Huawei Technologies Co and whether it should be allowed to provide equipment for future high-speed 5G networks. The U.S. government has said the equipment could be used to spy on the West.

“I think we need a base of rules to be respected by anyone who wants to do 5G in Europe,” Luxembourg Prime Minister Xavier Bettel said.

The European Commission has said it will come up with a recommendation about 5G after the EU summit.

Reporting by Philip Blenkinsop and Robin Emmott; Additional reporting by Robin Emmott, Francesco Guarascio, Andreas Rinke, Thomas Escritt, Anthony Deutsch and ; Editing by Hugh Lawson