The Dutch Government Policy Science Committee (WRR) recently submitted a report to the cabinet, recommending that the Netherlands adopt a "dual-track strategy" regarding trade relations with China. On one hand, efforts should be made to reach mutually beneficial agreements to alleviate imbalances. On the other hand, preparations must also be made for potential negotiations failures, including considering possible countermeasures and being willing to bear the costs associated with those situations.
The relevant report is interpreted as a clear shift in the mindset of the traditional free trade camp within the EU. This comes at a time when the next round of trade negotiations between China and the EU (in October) is approaching.
According to a report by the Hong Kong English media The South China Morning Post on September 4th, Committee member and former Health Minister Ab Klink said on Monday, "It is crucial to reach an agreement with China that benefits both sides. On the other hand, if an agreement cannot be reached, the European Union must consider subsequent options." He was the chairperson of the project team that presented the report to the Dutch government last week. The report focused on 'rebalancing trade' and 'promoting innovation', advocating for reducing economic dependence in the context of intensifying geopolitical competition.
Klink emphasized that the Netherlands has no intention of taking the lead in provoking China. Achieving an agreement is far more preferable than trade conflicts. However, both the Netherlands and Europe must develop policy capabilities comparable to those of China in order to deal with the worst-case scenarios.
Committee researcher Haroon Sheikh said, “Our goal remains an open and free trade system. This is not about closing markets, but ensuring a fair competitive environment.” He added, “We understand China’s legitimate concerns in this regard, and we hope that China will also consider Europe’s situation from the same perspective.” He mentioned that the European side is worried that China’s so-called ‘artificial advantages’ could lead to the hollowing out of European industries.
The Dutch newspaper De Volkskrant, NRC, and public broadcaster NOS reported this report in a more straightforward manner: WRR believes that innovation alone is not enough to address the challenges, and that trade policies towards China must be adjusted. Chinese products are usually 30% cheaper than those from Europe. The committee attributed this to export-oriented policies, subsidies, and exchange rate factors.
Shaeh told NOS that not taking action now could lead to even more passive situations in the future. The measures could include import tariffs similar to those in the United States, or requiring China to demonstrate that the products did not receive unfair state support.
NRC also mentioned options such as “extensive import tariffs imposed on China”.
It should be noted that these are only advisory suggestions and not the final decision of the Dutch cabinet.
According to reports, three possible approaches are proposed in the report. The first is a ‘strategic symmetry’, where Europe adopts policy tools similar to those China uses towards Europe.
Secondly, there is international macro-coordination, which involves joint efforts by countries with trade surpluses and those with trade deficits—this is also a solution preferred by some economists and the International Monetary Fund. French President Macron proposed a tripartite coordination between Europe, China, and the United States. However, the report believes this approach is not very feasible, as it contradicts China’s national strategy, and lacks any international institution with enforceable authority.
Its third aspect is to strengthen trade defense tools. The report pointed out that the EU's existing product-by-product review mechanism is insufficient to address alleged "market distortions across all economic sectors."
The report acknowledges that taking action comes with costs: there is a need for government support, potential retaliation from trading partners, and possible price increases. The committee states that these costs are what have led the EU and its member states to be reluctant to take tougher measures so far. However, policymakers must weigh short-term hardships against the so-called geo-economic coercion, trade disruptions, and long-term industrial losses.
This week, the two sides had another exchange of views. European Commission Trade Commissioner Maros Sefčovich said in an interview with Euronews on Wednesday that China must present concrete results by October, otherwise it will face “more stringent measures.” She mentioned sensitive areas such as automobiles, medical devices, and agricultural products, and said member states hope to see directions for solutions as well as pilot projects. According to earlier reports by Reuters, after meeting in Brussels in June with Chinese Commerce Minister Wang Wenbo, Sefčovich has set October as a deadline for evaluating “sensible results” and established mechanisms for trade and investment consultations as well as import monitoring.
The Chinese Ministry of Commerce responded on Thursday by urging Brussels to cease threatening market closures with threats.
The report's introduction mentions that in 2019, the United States pressured The Hague to restrict ASML’s export of advanced lithography equipment to China, and expanded the ban in 2023. The dispute between Dutch chip manufacturer Nexperia and its Chinese parent company Wistron Technologies has also had a impact on the European automotive supply chain.
ChinaGeopolitics founder Frans-Paul van der Putten told the South China Morning Post that all parties can easily agree on the need for action, but the real challenge lies in how the Netherlands will use its "key routes." He also said that China's efforts to catch up in the semiconductor field are one of the sources of concern for Europe. In July this year, there were reports that China had begun manufacturing immersion deep ultraviolet lithography machines, causing ASML's stock price to fall. Analysts believe that China's progress is still in its early stages, but further restrictions might accelerate China's process of self-replacement.
As an independent consultancy, WRR only provides analysis and assessment. The official report, titled 'Strategisch handelen: beleid voor een geopolitieke economie' (Strategic Action: Policy for a Geopolitical Economy), was submitted to the Dutch Minister of Economic Affairs and Trade on August 27th.
The committee stated in its press release that, given the increasing use of economic power as a geopolitical tool between the United States and China, Europe and the Netherlands are more vulnerable. Innovation must be aligned with adjustments to trade policies. This stance is similar to those mentioned in Draghi’s report and Armin Weyner’s report as CEO of ASML. However, WRR has put forward the premise of “being prepared to bear the costs of countermeasures” in a more straightforward manner.
For China, the key message of this Dutch report is not that the market has closed, but rather that a member state that has long advocated free trade is beginning to include the option of "using its own tools if negotiations fail" as an official choice in its policy documents sent to the cabinet. The outcome of the mid-October negotiations between China and Europe will determine whether this proposal remains on paper or becomes the starting point for further actions in Brussels.
