The new trade tool of the EU, which was previously only in the stage of media exposure, now has a clearer outline.
According to a report by Hong Kong's English-language newspaper The South China Morning Post on October 6, the newspaper obtained a document co-drafted by Germany and France, as well as a letter signed by German Chancellor Merz and French President Macron to European Commission Chairwoman Von der Leyen.
The document shows that France and Germany are promoting the establishment of a new trade defense tool within the European Union. When third countries cause significant market distortions, the European Union can take rapid action, and in necessary cases, even immediately cut off the channels through which these entities can enter the EU’s internal market.
Reported him as being described as an "emergency kill switch" for trade.
Mertz and Macron wrote in their joint letter that the European Commission needs a "trustworthy tool" to take "dramatic and systematic responses." This should be initiated through a "reverse qualified majority" mechanism, and strong measures should be taken when necessary, "until the channels for them entering the internal market are immediately cut off."
Reuters also confirmed this French-German plan on the same day. The report pointed out that although the new tool is not designed to target any specific country, China is likely to be the main focus of attention. The issues listed in the French-German document, such as dumping, extensive subsidies, and restrictions on currency convertibility, are precisely the main concerns raised by some EU leaders regarding China's trade policies in recent years.
The first issue that France and Germany hope to address is that existing EU trade mechanisms are acting too slowly.
According to the proposals put forward by both countries, in order to prevent individual member states from blocking EU actions, a so-called ‘reverse majority’ mechanism can be adopted after the European Commission proposes countermeasures. In principle, the measures can be implemented, unless the opposing party can organize enough member states to override them by a majority.
This actually reverses the logic of the past: instead of requiring the party supporting the action to first obtain a sufficient majority, the pressure from the organization’s majority is transferred to the party opposing the action.
Reuters further revealed that the French-German documents require the European Commission to initiate new measures “swiftly”. German government officials explained that this could even mean taking action within a few days.
However, this does not mean that the European Commission currently has this power.
The proposals put forward by France and Germany are still policy recommendations. To establish new trading mechanisms, relevant legislation must still be approved by the EU member states and the European Parliament. The document also does not specify what specific conditions the new mechanism needs to meet in order to be activated, nor what concrete measures the EU can take at that time.
New tools may be used to target situations that far exceed traditional anti-dumping and countervailing measures.
《Nan Hua Zao Bao》 claims that according to the French-German framework, it will be used to handle what is termed a “systemic distortion” which includes political or economic pressures, currency manipulation and monetary undervaluation, and can target individual commodities or expand to entire industries.
Both documents do not directly name China, and clearly state that the new tool should “not target specific countries”.
However, the document makes extensive use of expressions that have frequently appeared in discussions about China’s economic policy in the European Union in recent years. These include “unsustainable trade deficits with major trading partners,” “structural overcapacity,” “dumping,” “excessive and comprehensive subsidies,” as well as “exchange rate manipulation and currency undervaluation.”
German officials gave a more straightforward explanation to Reuters.
They believe that as trade is increasingly being used as a policy tool, the EU also needs to have sufficient power. This power should be comparable to the ability of the United States to impose tariff measures under the ‘301 Act’, as well as China’s ability to restrict the export of key minerals.
This explains why in the past week, this newly named tool outside of our company was briefly referred to as "European version 301".
According to Reuters, the documents also show that Paris and Berlin actually demanded that the European Commission propose two new trade instruments as soon as possible.
The first item concerns the issue of supply chain dependence that is becoming increasingly important in Europe.
Its basic idea is to limit companies from relying excessively on a single source for certain key materials, and to force companies to diversify their procurement by using new diversified mechanisms.
The second item is the market access tool that has attracted widespread attention this time – if a third country undermines the fair market environment recognized by the EU through political or economic means, the EU can restrict its entry into the single market.
Meanwhile, France and Germany also demand that the EU use existing trade defense tools more quickly and effectively. They want to increase the number of trade investigations and expand the scope of these investigations, so that trade measures can cover entire industries, rather than being limited to a single commodity.
In some specific industries, the two countries do not even plan to wait for new tools to be developed.
The French-German document states that the EU urgently needs to take measures regarding the import of chemical products, PET (polyethylene terephthalate), and hybrid vehicles. France also demands the immediate use of existing EU anti-dumping tools.
Therefore, the French-German solution is actually divided into three levels:
Use existing trade defense tools more quickly and more widely; establish new mechanisms to reduce dependence on key supply chains; create new tools that can quickly restrict third countries from entering the EU market.
The last item is what the media refers to as the "emergency cut-off switch" in trade.
It was previously unclear what relationship this tool has with the Anti-Coercion Instrument already in existence within the EU.
Over the past week, the media have compared the French-German proposal with the U.S.' 301 Act and the EU's own ACI.
Today, the French Presidential Palace clarified for the first time the difference between the two.
According to a source from the Elise Park, the new tool proposed by France and Germany will be more preventive than the ACI.
The ACTA was approved three years ago, primarily to deal with situations where third countries use trade and investment measures to exert economic coercion against the EU or its member states. Due to the wide potential scope of countermeasures, it has long been referred to as the EU’s “trade baton,” but it has not actually been implemented to this day.
According to sources at the French presidential palace, ACI is a countermeasure tool aimed at forcing the other party to stop after economic coercion has taken place. The new tools proposed by France and Germany hope to have a deterrent effect in advance.
"There, the purpose is to end coercion. And here, our goal is to have a tool with real deterrent power."
In other words, what France and Germany hope to fill is a gap between existing tools:
Anti-dumping and anti-subsidy measures are mainly targeted at specific goods and trade practices; ACI targets economic coercion; while the new tools aim to allow the EU to restrict the entry of third countries into European markets earlier and more effectively on the grounds of ‘systematic market distortions’.
More noteworthy than the tools themselves is the change in Germany's stance.
France and Germany were not always in agreement on their economic and trade policies towards China. France has long advocated for strengthening industrial protection within the EU and maintaining 'strategic autonomy', while Germany, which relies heavily on exports and the Chinese market, is relatively more cautious.
A typical example is when the EU imposed additional tariffs on Chinese electric vehicles in 2024. Germany voted against the measure, while France voted in favor. Ultimately, since the member states that opposed the tariffs failed to form a sufficient majority to block the measures, the tariffs still came into effect.
But The South China Morning Post says that in recent months, the positions of both countries have been moving closer together. As Chinese goods enter the European market in some key industries, Berlin's attitude has clearly changed, and some European officials even began using the term "China Shock 2.0" to describe the current situation.
According to a source from the Eliezer Palace,
It is crucial that Europe has now formed a consensus that these imbalances are unsustainable.
The French side claims that the European side 'does not want to start a trade war', but discussions with China must lead to concrete measures, and should not become a 'fruitless dialogue'.
This source also stated that some European industries have been facing what the Europeans call “unfair competition” for several months. They should not continue to wait until the negotiation results are certain.
A consultant at the French Presidential Palace spoke more directly to Reuters: France and Germany both hope to end Europe's 'naivety' in trade issues.
European Union Committee has expressed "welcome" on the proposal by France and Germany.
The European Commission stated that the French-German proposal is a "valuable contribution" to the EU's discussions on how to address "geopolitical economic risks and global imbalances," and it also aligns with Merkel's stance on competitiveness and handling trade relations with countries including China.
In choosing to present this proposal at this time, France and Germany also have an important background to consider.
European Union Trade and Economic Affairs Commissioner Maros Sefczyovici will hold another round of consultations with Chinese Commerce Minister Wang Wentao in Beijing on October 8-9. After that, European Union leaders will discuss trade issues with China in Brussels.
France still hopes that the talks in Beijing will lead to a negotiated solution, but according to The South China Morning Post, within the EU, patience is increasingly being lost regarding the need for China to make changes.
China has previously responded to reports regarding Germany and France’s promotion of the ‘European version of 301’.
On September 29, the Ministry of Commerce of China stated that such measures constitute "typical protectionist and unilateral actions." If the European side "diverts from dialogue and consultation with China while also showing off its strength towards China," it will seriously undermine mutual trust and disrupt the entire negotiation process. If the European side insists on introducing discriminatory restrictions against Chinese enterprises or products, China will "resolutely respond."
The exposure of the latest French-German documents has further clarified the specific details of what was previously referred to as the "European version of 301."
It is not simply a copy of the US 301 provisions, nor is it a re-packaging of the existing EU ACI regulations. Instead, France and Germany hope to grant the European Commission a new power: in response to what they consider to be “systematic market distortions,” the EU can lower the threshold for internal decision-making and take measures that affect the entire industry in a very short period of time. In extreme cases, it could even immediately block relevant entities from entering the EU market.
However, this “new weapon” is currently still in the initiative stage between France and Germany. How it will ultimately define “systematic distortion”, under what conditions it will trigger, what measures can be taken, and whether it will receive support from EU member states and the European Parliament remain to be determined by subsequent legislative processes.
