European Commission vows tougher action on trade with China
By Julia Payne
EU's Trade Relationship with China Under Scrutiny
BRUSSELS, May 29 (Reuters) - The EU's trade and investment relationship with China is "not sustainable", the European Commission said on Friday, vowing a stronger response as commissioners discussed how best to shield Europe's industries from surging Chinese imports.
Upcoming EU Leaders' Summit and Potential Proposals
Commissioners were pitching ideas ahead of an EU leaders' summit on June 18 to 19, and possible proposals could include forcing EU firms to diversify supply chains or introducing new trade mechanisms to curb China's access to the EU market in chemicals, metals and clean energy technology.
Commission’s Statement on Economic and Security Interests
"As economic and security interests become ever more intertwined, both dimensions will require a more robust and coherent response," the Commission said.
Any concrete proposals for the response are not expected to be announced until the third quarter of this year.
Western Governments and the Shift from Offshoring
Western governments are trying to reverse some of the offshoring to China that peaked in the early 2000s, depleting industrial know-how and hubs in their countries, particularly in the U.S. and EU members.
Trade Imbalances and Overcapacity in Focus
TRADE IMBALANCES, OVERCAPACITY IN FOCUS
G7 Summit and Critical Minerals
The Group of Seven (G7) wealthy nations will also tackle trade imbalances and overcapacity at a mid-June summit as China increasingly flexes its dominance on rare earths and other metals that are critical for sectors including defence, tech, energy and automotive industries.
Policy Responses in the U.S. and EU
U.S. President Donald Trump has pitched "America First" and, early this year, the EU proposed a new "Buy European" policy and RESourceEU to accelerate the development of critical mineral supply chains in the EU as well as partnerships with mineral-rich countries from Central Asia to Australia and Brazil.
China’s Reaction to EU Policies
China's Foreign Ministry accused the EU on Thursday of using trade data selectively to justify claims of imbalances, and it has repeatedly threatened "strong countermeasures" should the EU adopt "Buy European" and revised tech sovereignty policies. China rejects the notion that its trade practices are unjust.
Challenges Facing European Industry
Europe's industry faces a tougher climate than U.S. rivals, constrained by higher energy costs and stricter regulation.
EU Trade Tools and Import Controls
Industry Commissioner Stephane Sejourne said this week he wants the bloc's existing trade tools such as import duties and quotas to be used "more systematically" across sectors, rather than targeting specific companies or materials.
The EU has tried to curb some Chinese imports, with mixed results. The bloc imposed tariffs on heavily subsidised Chinese electric vehicles, but not hybrid models. Hybrids accounted for nearly 40% of new car registrations so far this year and China's market share in Europe continues to rise.
Internal EU Divisions: France vs. Germany
While the Commission is keen to adopt a tougher stance, it will have to navigate differences between France and Germany to pass major legislation.
French and German Perspectives
"Paris argues that Europe's open market is absorbing the combined effects of Chinese subsidies and US protectionism," Carsten Nickel, deputy research director at Teneo, wrote in a report.
"Germany's position is more conflicted," Nickel said, with concerns about mounting pressure on German manufacturing constrained by the deep dependency of big industrial groups on China's market.
(Reporting by Julia Payne;Editing by Helen Popper)
