A week in Brussels, EEA EFTA, Latest news, Switzerland

Week in Brussels: China, Andorra and San Marino, Switzerland, Indonesia

This week started with a visit to Europe by Chinese president Xi Jinping but ended with news that European firms’ confidence in the Chinese market is at an all time low.  

The European Commission announced a timeline for its signature of the European Union’s association agreement with Andorra and San Marino. There were also updates on a trade defence duty circumvention case concerning Indonesia. 

By Rob Francis and Iana Dreyer.

European business confidence in China at all-time low  

European business is increasingly pessimistic about the Chinese market, according to a survey published today by The European Union Chamber of Commerce in China. 

68% of respondents – the highest on record – said that doing business in China has become “more difficult”. 

“Instead of benefitting from the strong economic rebound that many had expected, European firms operating in China found themselves facing more uncertainty,” said the chamber. 

Companies highlighted China’s “sluggish demand, growing overcapacity and the continued challenges in the real estate sector”. 

Despite 45% of respondents reporting market opening in their industry, which is an increase of 9% year-on-year, 58% said they missed business opportunities as a result of market access or regulatory barriers. 

55% of respondents consider China’s economic slowdown as a “top-3 business challenge”, an increase of 19%, and 44% are “pessimistic about profitability over the next two years”, the highest on record. 

42% – the lowest on record – said they are considering expanding their Chinese operations this year, and 13% of companies said they are shifting existing investments out of China 

“There are worrying signs that some European companies are either siloing operations or scaling down their ambitions in China as the challenges they face start to outweigh the benefits of being here,” said Jens Eskelund, the chamber’s president. 

“European companies are confronted by growing uncertainties in China, in large part due to economic volatility and less predictable policy direction,” said Denis Depoux, global managing director of Roland Berger which conducted the survey for the chamber.  

“While volatility can be managed, the lack of predictability may reduce the appeal of the Chinese market,” said Depoux. 

Commission plan to sign agreement with Andorra and San Marino in “late autumn” 

European Commission executive vice-president Maroš Šefčovič said on Tuesday (7 May) that the EU executive is planning to sign the association agreement between the EU and Andorra and San Marino “in late autumn”. 

Šefčovič’s comments followed a meeting with Andorran prime minister Xavier Espot and San Marino foreign minister Luca Beccari in Brussels. 

Šefčovič said that Hungary, which takes over the presidency of the council of EU member states on 1 July, is “interested in swift progress”. 

The council must first give its approval for the commission to sign the pact, after which it will need to be ratified by the parties. 

At the EU level the agreement needs to be ratified by the European Parliament. The ratification process in Andorra includes a referendum, whilst in San Marino the national parliament needs to approve the pact. 

If necessary, the agreement with one of Andorra and San Marino can be applied before the ratification process for the other is concluded.  

Espot said he hoped the council can approve the signature “as soon as possible”.  

The prime minister added that there are “high expectations” in Andorra concerning the deal and said that it is more than a trade and economic agreement.   

The agreement will “strengthen Andorra’s place on the international scene”, said Espot. 

The agreement is not without interest for other neighbouring counties which want greater involvement in the EU’s single market. 

The current geopolitical contexthas given a whole new dimension tothe need to consolidate our partnership with neighbours and other countries sharing the same values,” said Šefčovič. 

Beccari agreed, saying the agreement can “serve as an inspiration” for other countries seeking similar ties.  

“It’s like an EEA plus agreement, because it basically covers everything,” said the foreign minister, referring to the European Economic Area which extends the single market to members of the European Free Trade Association.  

EU- Switzerland: still aiming for end-of-year agreement 

During Tuesday’s press conference Šefčovič, who is also responsible for the EU’s relations with Switzerland, said that Brussels and Bern still hope to finalise the current package of agreements by the end of the year. 

The Swiss government and EU member states approved their negotiating mandates on 8 March and 12 March respectively, based on an agreement that was reached in December. 

Šefčovič, who will be travelling to Bern in June, said he was “convinced” the talks can be concluded by the end of the year and that meetings are happening each week.  

But the commissioner warned that, since the talks come as a package, “nothing is agreed until everything is agreed”. 

Indonesia anti-circumvention update: end to biodiesel case, extension of steel duties 

The European Commission made it official that it was dropping its investigation into circumvention of anti-dumping and anti-subsidy duties on biodiesel duties from Indonesia via China and the United Kingdom initiated in August 2023. 

The official reason for this move, given by the commission, is the withdrawal of the complaint by its instigators. The rumour mill in Brussels ahead of the withdrawal decision indicated that the investigation was too complex and too large for the commission to handle.  

The decision is probably also tied to the fact that Indonesia started litigating against the countervailing duties at the World Trade Organization in Geneva. 

But circumvention now being the big game in town in EU trade defence, the commission has not just dropped this case and gone quiet. 

This very same week it extended countervailing duties on stainless steel sheets and coils, imposed in 2022, from the very same Indonesia to Türkiye, Vietnam and Taiwan. 

In a note to Türkiye, the commission’s chief enforcement officer Denis Redonnet wrote: “the European Commission has decided (…) to extend the definitive countervailing measures on imports of certain cold rolled stainless steel sheets and coils from Indonesia to imports of SSCR consigned from Türkiye, whether declared as originating in Türkiye or not.” 

“At the same time, the commission has decided to terminate the investigation concerning the possible extension of the definitive anti-dumping measures on imports of SSCR from Indonesia to imports of SSCR consigned from Türkiye”.

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