China, France agree to expand trade, EU raises 'difficult issues'

BEIJING (Reuters) - China said on Monday it would buy more planes and agricultural products from France and work on market access issues, shoring up its trade ties with Europe as danger mounted of a tariff war with the United States.

Chinese Premier Li Keqiang told French Prime Minister Edouard Philippe late on Monday that China was planning to purchase more planes this year and was ready for more talks with France on buying Airbus aircraft.

“I explained to Mr Prime Minister that in recent years we have bought quite a lot of passenger aircraft, and there needs to be a period to digest this,” Li told a joint news conference. “In spite of this, we are still willing to strengthen cooperation with France’s Airbus.”

China has struck a very different tone with the United States, having warned that Boeing could become a casualty if the world’s two largest economies failed to halt their slide toward a trade war.

Both China and the European Union are locked in their own trade disputes with the United States, and China has been seeking common ground with the EU in opposing what Beijing sees as U.S. protectionism.

“We believe that relevant frictions and disputes can be resolved via talks. There are no winners from fighting a trade war,” Li said.

“All sides should join together to expand growth and not engage in putting up trade barriers or protectionism. This is good for nobody,” he said.

Later this week, the Trump administration is expected to unveil new measures to curb Chinese companies buying stakes in U.S. firms, giving another twist to a spiraling trade conflict between the world’s two largest economies.

The U.S. Treasury Department is drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with “industrially significant technology,” a government official briefed on the matter said on Sunday.

Washington has complained that China is misappropriating U.S. technology through joint venture rules and other policies, and it has already announced tariffs on $34 billion worth of Chinese goods, the first of a potential total of $450 billion, as a result. The new tariffs are due to take effect on July 6.

PLANES AND FARM PRODUCTS

During a visit to China in January, French President Emmanuel Macron said a contract with Beijing for 184 Airbus A320 narrow-body jets would be finalised soon. Li’s remarks appeared to strengthen the chance of more business for Airbus, without being specific on numbers.

“I’m glad that China has confirmed its strong willingness to soon firm up its commitment, made in January, to purchase Airbus jets,” Philippe said.

China on Monday also signed an agreement to import beef from France. Last year, China ended an embargo on French beef that was first imposed after the mad cow disease crisis in Europe more than two decades ago.

Li also said China would buy more farm products, without specifying.

EU CONCERNS

Hosting talks on a bilateral investment agreement with the European Union on Monday, Vice President Liu He also stressed that China and the EU had a common interest in defending the global multilateral trading system.

“Both sides believe that we must resolutely oppose unilateralism and trade protectionism and prevent such behavior from causing volatility and recession in the global economy,” Liu told a media briefing after the talks.

Both China and the EU have already announced retaliatory measures against the United States punitive tariffs.

China will impose additional 25 percent tariffs on 659 U.S. goods worth $50 billion in response to the U.S. announcement that it will levy tariffs on Chinese imports.

Tariffs on $34 billion of U.S. goods including agricultural products such as soybeans will take effect from July 6, the Chinese commerce ministry said. Soybeans are China’s biggest import from the United States by value.

The European Union last week imposed tariffs on a range of U.S. goods in response to import duties on EU steel and aluminum by the U.S. administration.

A top EU official, however, made it clear that Europe is not fully on the same page as China.

The EU and China discussed “difficult issues” such as state subsidies, forced tech transfers, and cyber security issues during the talks, European Union Commission Vice President Jyrki Katainen said in a news conference following the EU-China High-level Economic Dialogue in Beijing.

Katainen said China and the EU need to work together to tackle overcapacity in sectors such as steel and aluminum, specifically identifying industries that Trump first took aim at when he embarked on a tariff war

He also urged China to prevent overcapacity in other industries, including high-tech sectors covered by the “Made in China 2025” strategy.

The “Made in China 2025” plan aims to upgrade China’s capabilities in advanced information technology, aerospace, marine engineering, pharmaceuticals, advanced energy vehicles, robotics and other high-technology industries.

Last month, European lawmakers approved a far-reaching proposal for tougher scrutiny of foreign investments, partly in response to a flurry of Chinese acquisitions of European firms.

Liu voiced hope that the EU would take concrete steps to lower restrictions on European exports to China.

According to Liu the two sides expect to exchange lists of proposals for the bilateral investment agreement at a China-EU summit in Beijing next month.

“It’s a big step forward but doesn’t mean an investment agreement will be adopted immediately,” Katainen said.