00:00Let's talk to Hosok Lee Makayama, Director of the European Centre for International Political Economy.
00:05Hosok, welcome back. Good to see you.
00:07What's your readout? What did you make of this China-EU Summit?
00:16Hosok, I'm just checking you can hear me. It's Jamie in studio in London.
00:20Sorry, Jamie. I can hear you now. Thank you so much. Sorry for the delay.
00:24No, good to see you. You hold me for a second.
00:26What did you make of the Summit?
00:27Well, it was not a typical Summit, as you would expect, with new deliverables, new market openings, and new promises.
00:37And it's a very stark difference compared to the EU-Japan Summit we had a couple of days before that promised a lot of new cooperation.
00:46But this is equally important between the EU and China, because I think, in a sense, it was a reset,
00:52and it was also a reality check in terms of where each party stood in relation to each other.
00:59The EU has called for a rebalancing of trade with China.
01:03What would that look like?
01:05Well, the truth of the matter is that Europe suffers a €400 billion deficit against China.
01:12That's absolutely true.
01:13And that's also like a mainstay of EU complaint against China.
01:18And it is largely due to the fact that China has caught up much faster in engineering and manufacturing than EU managed to actually offset that through its, for example, agricultural export or luxury items that it usually sells to China.
01:34But the truth remains is that both EU and China are very aggressively export-led economies.
01:41It just so happens that EU has a deficit against China in the same way that China has a deficit against other countries.
01:50And this is very, very difficult to solve, considering that they are basically competing in the same product.
01:56The summit led to a tentative agreement on rare-earth exports.
02:02How significant is that?
02:05Well, under the new arrangement, the export licensing regime that China is now applying on seven medium to heavy rare-earth elements,
02:17still against the EU, meaning that the EU will still be under this regime and there is an exemption for the EU.
02:26However, there will be a sort of a fast-track procedure.
02:29And so far, it seems that China has actually lived up to its word with 70% of all the licensing applications coming in from European companies,
02:41mostly Germans, by the way, being issued within 24 hours.
02:46And now I think the most important part here is that these export controls are not necessarily aimed at Europe.
02:55But China has decided to apply them equally to Europe and the United States because they are allies.
03:02And now Europe is saying, hold on a second, if you want us between the United States and China,
03:07you have to give us some benefits, you have to give us some trust.
03:11And I think, first and foremost, what this fast-track procedure will allow is that if a license is denied,
03:19China will offer an explanation.
03:20And this has not been the case in the past.
03:23Hosok, good to see you.
03:24Thanks so much for coming on the program.
03:26Hosok Lee-Makiyama, Director of the European Centre for International Political Economy.
