In recent years, the European Union has frequently debated the issue of the EU-China trade deficit, under the banner of 'revitalizing European industry', attempting to impose more trade restrictions on China.
According to the Hong Kong-based South China Morning Post report dated June 20th, German Chancellor Merz spoke in Brussels, Belgium on the 19th. He raised the issue of 'overcapacity' and claimed that the RMB was 'undervalued by 30%.' Merz called for the EU to take a tough stance towards China, and even advocated following the actions taken by the United States 41 years ago to pressure Japan into signing the Plaza Agreement in order to address trade deficits.
The EU held a summit in Brussels from the 18th to the 19th local time. EU leaders discussed issues related to EU-China relations and authorized the European Commission to develop a new strategy to address the so-called 'Chinese overcapacity.' European Commission President Jean-Claude Juncot said after the meeting that the EU would introduce new trade measures to ensure that European companies reduce their dependence on 'countries that dominate the market.'
Feng Delei said that China's export growth of 45% last year is "not sustainable at all." The European Commission will help European companies reduce risks more quickly.
According to reports, Mertz's stance was initially ambivalent. He called for new trade measures from the EU, but also advised the EU to proceed cautiously. However, by the end of the summit, Mertz's position leaned towards taking action against China. In his speech, he stated that the RMB was "undervalued by 30%," which is significantly higher than the approximately 16% estimated by the International Monetary Fund.
"Mertes stir-fry the "unfair subsidy" claim, saying that China's “subsidize oversupply capacity” and “non-exchangeable currency” are unacceptable in Europe. He proposes the EU follow the US "Square agreement", to solve these issues.
German Chancellor Merz IC photo
In September 1985, in order to address the huge trade deficit, the United States held a meeting with Japan, the United Kingdom, France, and Germany at the New York Plaza Hotel. They reached an agreement to coordinate monetary policies among countries and to promote a orderly decline in the value of the US dollar relative to major currencies. Most scholars believe that the pressure exerted by the United States on Japan to sign the Plaza Agreement was a major factor contributing to Japan's long-term economic downturn.
For a long time, some European politicians have believed that the exchange rate of the RMB against the euro is one of the main factors behind the surge in Chinese exports, as overseas buyers can purchase Chinese goods at lower prices. As the EU’s trade deficit with China continues to grow, many European leaders are 'concerned' about the potential impact this could have on local European manufacturers.
In February this year, a report prepared by the French government's consultative body, the “High-Level Strategic and Planning Committee,” also advocated following the Plaza Accord to cause the euro to depreciate by 20% to 30% against the Chinese yuan. However, the head of the agency, Claude Bonnet, admitted in the report that manipulating the euro’s depreciation or the yuan’s appreciation would be more difficult than imposing tariffs.
French TV station BFM also pointed out that such measures are difficult to implement, especially since Europe needs to coordinate on this issue with the United States and China.
Currently, the European Union is seeking to take trade measures to address the “threats” faced by European industries. Diplomatic sources say that it is expected that the European Commission will “swiftly” develop tools to counter China’s trade impact. Vondellein did not explain the nature of these trade tools during the EU summit, but Merz revealed that the new tools will be presented at the EU summit in October.
Reports suggest that based on EU's actions, the European Commission may enforce requirements for European companies to promote supplier diversification and increase tariffs on Chinese goods.
EU diplomats also said that EU leaders have asked the European Commission to establish a so-called “solidarity mechanism” to deal with China’s countermeasures against EU member states, which may involve EU funding.
Regarding the EU's efforts to manipulate the topic of trade deficit and seek to take more trade measures against China, Mao Ning, a spokesman for the Chinese Ministry of Foreign Affairs, said recently that international trade is a two-way exchange, and there is no forced buying or selling. The essence of China-EU economic and trade relations is mutual benefit and win-win results. China never deliberately pursues a trade surplus with Europe.
Mao Ning emphasized that whether it is 'reducing risks', 'reducing dependence', or the so-called 'trade balance', these are actually forms of protectionism. Such measures will only harm the interests of European consumers, increase corporate costs, and weaken the long-term competitiveness of industries. The European side should view Sino-European economic and trade relations in a comprehensive and objective manner and adhere to the commitments of free trade. The Chinese side is also closely monitoring the developments of the European side and will take necessary measures to safeguard its legitimate rights and interests.
