Brussels, Belgium. The European Commission warned on Friday that its trade and investment relationship with China is unsustainable and needs a more robust response after commissioners met to discuss how to shield European industries from rising Chinese imports.
De-risking approach
The Commission said its overarching approach remains de-risking, not decoupling. “China is a critical partner, and engagement and dialogue will continue while communication channels remain open,” it said in a statement. “At the same time the current state of the trade and investment relationship is not sustainable. As economic and security interests become ever more intertwined, both dimensions will require a more robust and coherent response,” it added.
Measures under discussion
The EU executive is presenting ideas ahead of an EU leaders’ summit on June 18-19. Possible measures include requiring EU companies to diversify their supply chains and creating new trade tools to limit China’s access in chemicals, metals and clean technology.
The bloc is also seeking alternative supplies of critical minerals through partnerships with resource-rich countries from Central Asia to Australia and Brazil, under its RESourceEU initiative.
Trade tools and imports
Industry Commissioner Stéphane Séjourné said this week he wants the bloc’s existing trade tools, including import duties and quotas, to be used “more systematically” across sectors rather than targeting specific companies or materials.
The EU’s efforts to limit Chinese imports have produced mixed results. The bloc imposed tariffs on heavily subsidised Chinese electric vehicles but not on hybrids, which accounted for nearly 40% of new car registrations so far this year. China’s market share in Europe continues to rise.
G7 and China response
The G7 is also set to address trade imbalances and overcapacity at a mid-June summit, as China tightens its grip on rare earths and other metals critical to the defence, technology, energy and automotive sectors.
China’s Foreign Ministry accused the EU of using trade data selectively to justify claims of imbalances and has repeatedly threatened countermeasures if Brussels moves ahead with its “Buy European” policy. China rejects the allegation that its trade practices are unjust.
