LDN - Business

EU to sign trade deal with Singapore, avoid criticizing China

[October 19, 2018] By Philip Blenkinsop and Robin Emmott

BRUSSELS (Reuters) - The European Union was set to sign a trade deal with Singapore on Friday after talks with Asian leaders keen to push back against U.S. protectionism, but efforts to encourage China to drop state subsidies ran into resistance from Beijing.

The biennial Asia-Europe Meeting (ASEM) brings together leaders representing 65 percent of global economic output -- from the EU, Switzerland, Norway and 21 Asian countries, including Russia and China.

The EU hoped to use the gathering to show the world it can move beyond Britain's departure from the bloc.

However, a final summit communique was set to omit a call for an end to government trade distortions, according to the latest draft and EU diplomats.

China requested the changes at a negotiation of senior EU and Asian officials overnight, two diplomats said. The statement will instead commit to "free and open trade on a level playing field" and to fighting "all forms of protectionism", in an indirect reference to Trump's tariffs on Chinese imports.

The earlier draft, seen by Reuters, had called for "the elimination of unjustifiable market distorting measures by governments".

SUBSIDIES

European Commission President Jean-Claude Juncker was due to discuss subsidies with Li at lunch, diplomats said.

The European Union and the United States accuse China of directly funding state companies through Chinese banks to help them to dominate global markets, breaking rules set down by the World Trade Organization, of which China is a member.

The EU also wants China, which produces and consumes half the world's steel and has cut some 220 million tonnes of manufacturing overcapacity since January 2016, to reduce its capacity further.

After sessions on improving connectivity and the multilateral system and a host of bilateral meetings, the summit was due to finish on Friday with the EU signing an agreement with Singapore Prime Minister Lee Hsien Loong.

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French President Emmanuel Macron and Pakistan's Federal Minister for Inter Provincial Coordination Fehmida Mirza shake hands as they attend the ASEM leaders summit in Brussels, Belgium October 19, 2018. REUTERS/Francois Lenoir

That pact has been eight years in the making. Negotiations ended in 2014, but as protests mounted against other trade accords, such as one planned with the United States and one struck with Canada, the deal was sent for approval to the European Court of Justice

The Commission hopes the agreement, which still needs the backing of the European Parliament, will take effect next year.

VIETNAM, INDONESIA

It would likely follow a larger free trade agreement that the EU plans with Japan, and would be the EU's first trade agreement with a member of the 10-country Association of Southeast Asian Nations (ASEAN).

The EU remains interested in a deal with ASEAN, after talks were shelved in 2009. In the meantime, EU negotiators have agreed a trade accord with Vietnam, are in negotiations with Indonesia and have held talks with three other ASEAN members.

However, other less harmonious issues may also surface.

The EU told Cambodia this month that it would lose its special access to the world's largest trading bloc and said it was considering similar sanctions for Myanmar in a toughening of policy on human rights in Southeast Asia.

Cambodian Prime Minister Hun Sen was in Brussels, while Myanmar sent its minister for international cooperation.

The summit statement will call for an end to the Rohingya crisis in Myanmar and Bangladesh.

"Of course we will have to bring up questions of human rights and values in bilateral talks," German Chancellor Angela Merkel said.

(Additional reporting by Daphne Psaledakis; Editing by Kevin Liffey)

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