China's Xi, Spain's Sanchez seek to ease EU-China trade disputes

By Joe Cash

BEIJING (Reuters) - Chinese President Xi Jinping on Monday urged visiting Spanish Prime Minister Pedro Sanchez to play a "constructive role" in improving strained ties between Bejing and the European Union.

Sanchez for his part said he hoped the EU could avoid a trade war with China even as Brussels weighs imposing tariffs on China-manufactured electric vehicles.

In their meeting, Xi also talked up deepening commercial ties between China and Spain in sectors such as artificial intelligence, digital economy, new energy and other high-tech fields.

The Chinese leader said Beijing wanted to work with Brussels to further develop a China-EU relationship where the two maintain their independence and autonomy but also succeed together and bring benefit to the world, a Chinese readout said.

"It is hoped Spain will continue to play a constructive role in this regard," Xi added.

Sanchez responded: "Spain wants to work constructively so that relations between the two are closer, richer and more balanced."

Beijing in June said that frictions with the EU over its plans to impose tariffs of up to 36.3% on its electric vehicles (EVs) could trigger a trade conflict, days after China announced a retaliatory anti-dumping probe into European pork imports.

China in August then raised the stakes by opening an investigation into the 27-strong bloc's dairy subsidies.

Prior to meeting Xi, Sanchez told business events Spain would work for a negotiated consensus to the EV dispute within the World Trade Organization and that a "trade war would benefit no one," a government source said.

Spain in 2023 exported $1.5 billion worth of the pork products that China will investigate, Chinese customs data showed, dwarfing the outbound shipments from second- and third-ranking the Netherlands and Denmark.

Spain also sold just under $50 million worth of targeted dairy products to China last year.

But in a promising sign for Spain's pork producers, a separate source with direct access to Xi's meeting with Sanchez said the two leaders had "found harmony and understanding," when asked about possible curbs on Spain's outbound pork shipments.

"The meeting went extremely well," the source said, adding that both defended their positions while seeking agreements.

FAIR TRADE

"We want to build bridges together to defend a trade order that's fair," Sanchez told China's second-ranking official, Premier Li Qiang, before meeting Xi.

Spain had a trade deficit of 17.27 billion euros ($19.07 billion) in the first half of this year, according to government statistics.

Sanchez will also want reassurance that China will not strike back at Brussels by raising its own tariffs on imported large-engined gasoline-powered vehicles, as state Chinese media have suggested it might.

Spain could also be impacted by the Chinese EV tariffs. Last week SEAT-CUPRA's CEO said that an electric vehicle made in China and designed in Spain by CUPRA, which is owned by Germany's Volkswagen, would be "wiped out" if the European Commission followed through with planned imports on Chinese-made vehicles.

Sanchez on Tuesday is expected to meet representatives of SAIC Motor, one of the Chinese automakers most affected by the EU tariffs, and sign a Memorandum of Understanding with greentech Envision, which is building an EV battery plant in Spain.

"In this increasingly geopolitical and economic context, as you have pointed out, we must work together to resolve differences through negotiation," Sanchez told Xi.

In an advisory vote in July, Spain along with France and Italy, supported the European Commission's proposal to adopt additional duties on Chinese-made EVs on top of the bloc's standard 10% tariff.

But Beijing has been canvassing the EU's member states to reject the curbs at a final vote on it in October.

The tariffs would be implemented in addition to the EU's standard 10% import tariff unless a qualified majority of 15 EU members representing 65% of the EU population vote against them.

($1 = 0.9054 euros) (This story has been corrected to clarify that the risk to Spanish automakers is from EU, not Chinese tariffs, in paragraph 17)

(Reporting by Joe Cash in Beijing and Belen Carreño in Madrid; Editing by Muralikumar Anantharaman, Charlie Devereux, Christina Fincher and Angus MacSwan)