The European Commission agreed on a tough new approach to trade relations with China at a rare China-focused debate. In a presentation, Trade Commissioner Maros Sefcovic laid out why the EU needed to take stronger steps to defend itself from what is described as a new “China shock” to its industries. This may require developing a new instrument to compel companies in critical sectors to expand both the number and the locations of the suppliers they use. Sefcovic is also expected to ramp up the use of safeguard measures in sectors that are under severe pressure from Chinese overcapacity. Safeguards are faster and broader than anti-dumping or anti-subsidy probes and are difficult for dissenting member states to block, since a qualified majority is required to obstruct them. They are expected to be used in some chemicals and machinery industries.
European Commission President Ursula von der Leyen is supportive of a more robust approach, with Commissioners expected to fall into line behind her. The goal was to ensure none of the other 26 Commissioners were in doubt as to the severity of the problems the EU faces. Sefcovic described a bloodbath of trade data, job losses and industrial decline to his colleagues, who also heard from Macro-economist Alfred Schipke, formerly the Head of Mission for the International Monetary Fund (IMF) in China. The EU Commission sees links between Chinese economic policies and deindustrialisation.
Measures will not follow immediately: von der Leyen will now take the recommendations to the European Council meeting of the 27 national leaders on June 18 and 19, which has China on the agenda. The Council summit will be instrumental in determining whether the bloc meaningfully changes course on China policy. Member states are notoriously divided on the matter, and senior officials said that nothing can move forward until they are more aligned.
While France, Italy, and the Netherlands have been among the major economies calling for a more assertive approach to China, it is not known exactly where the largest EU member, Germany, will land on the issue. The Commission’s “overarching approach remains de-risking, not decoupling”, the account of the meeting said, describing China as a “critical partner, and engagement and dialogue will continue”.
Chinese Commerce Minister Wang Wentao is expected to meet Sefcovic in Brussels on June 29, while Vice Minister Ling Ji will visit Brussels for talks three weeks earlier. More technical contacts are ongoing, with the incoming Director General of Trade Ditte Juul Jorgensen expected to engage with Chinese counterparts once she takes up her role this week. Measures are expected in October. China has already announced it will retaliate it its interests are harmed, the South China Morning Post reports.
