According to a report by “European Dynamics” (now renamed “Rapporteur”) on September 29th, the European Commission is developing a new trade defense mechanism. This mechanism would trigger increased tariffs if the import volume of certain Chinese goods exceeded a specified threshold.
According to this draft plan, in order to reduce dependence on China by the EU, the EU will impose additional tariffs on products that account for more than 40% of EU imports from China. Officials are considering applying this measure to strategic sectors such as semiconductors, key raw materials, and rare metals.
This tool was first proposed by EU Trade Commissioner Maroš Šefčovič in June this year. Currently, relations between China and the EU are strained due to issues such as China’s trade surplus with the EU, restrictions on the export of key minerals, and barriers that European companies face when entering the Chinese market. It is in this context that the EU is promoting this tool.
Savich will visit Beijing on October 8-9. A week later, European Commission President Barroso is expected to introduce the situation regarding relations with China to the leaders of EU countries at the EU summit in Brussels.
EU officials hope that this new tool will be easier to implement than the EU’s ‘Anti-Speculation Tools’, which are often referred to as ‘trade nuclear weapons’. To use the Anti-Speculation Tools, it is necessary for the governments of EU member states to pass a specific majority vote, determining that there is economic coercion.
A person familiar with the matter said that according to the proposed new mechanism, the European Commission can initiate this measure unless a specific majority of member states expresses opposition.
Another person familiar with the discussion revealed that Shevchovich said during a meeting with business leaders this month that fields such as pharmaceuticals, chemicals, automobiles, and key raw materials could potentially be included in the scope of application of this tool.
Last year, the EU’s trade deficit with China reached about 1 billion euros per day. This month, von der Leyen stated in her “EU State of the Union Address”: “We will use all available tools to rebalance our relationship.”
Before this visit to China, Šefić repeatedly demanded that Beijing achieve “substantial results” on issues such as trade imbalances, export controls for key minerals, and the restrictions faced by foreign companies entering China’s domestic market.
A person close to Šefić said that he is optimistic about the prospects of negotiations. The person mentioned that possible progress could include reducing the EU’s trade deficit with China in some industrial goods sectors, making it easier for European companies to obtain Chinese rare earth export licenses, and improving the conditions for European companies to enter the Chinese market.
However, other people who are aware of the preparations for this meeting are skeptical about whether China will make any substantial concessions. The reason is that China has a huge trade surplus and also has ambitions in the field of advanced manufacturing.
Shevkovic warned that if no progress can be made, the EU may take action, including implementing this proposed supply diversification tool.
The Chinese Ministry of Commerce stated that currently, China and Europe are continuing dialogues under the trade and investment consultation mechanism, exploring ways to resolve mutual concerns. If the European side engages in dialogue and consultations with China while also showing off its strength towards China, it will seriously undermine mutual trust, disrupt the overall process of consultations, and affect the overall situation of economic and trade cooperation between China and Europe.
China urges the European side to adhere to the correct path of resolving differences through dialogue and negotiation. China will closely monitor the subsequent actions of the European side. If the European side insists on introducing discriminatory restrictions on Chinese enterprises or products, China will definitely respond resolutely to defend the legitimate rights and interests of Chinese industries.
