The European Union’s Trade Commissioner, Maros Sefcovic, is set to visit Beijing on October 8-9. European media have described this trip as the “final trade negotiation” as a potential trade war between China and the EU looms if no agreement is reached.
According to reports from Reuters, French President Emmanuel Macron and German Chancellor Friedrich Merz wrote to European Commission President Ursula von der Leyen on October 5. In their letter, they highlighted that the “systemic practices distorting the market” pose a threat to the EU’s economic and industrial foundations, prompting the urgent need for action. They attached a document outlining proposals regarding the trade imbalance with China.
The European Commission stated that the proposals from France and Germany provide valuable insights regarding geopolitical economic risks and global imbalances, aligning with von der Leyen’s stance on competitiveness issues and handling relations with trade partners. The EU is considering new measures focusing on issues such as dumping, extensive subsidies, and limiting currency convertibility, many EU leaders believe these market-distorting practices are prevalent in China.
German officials emphasized the need for the EU to enhance its trade defense and retaliation capabilities as countries increasingly use trade as a pressure tool. They stress the importance of being as effective as the US in imposing tariffs under the “Section 301” clause. The EU must swiftly and effectively utilize trade defense tools, conduct more investigations, and implement broader measures covering entire industries.
China’s trade surplus with the EU has reached a historic high, with data from the General Administration of Customs of China in September revealing that the trade surplus with the EU had surpassed $242 billion by the end of August this year, exceeding that with the US.
On October 6, a spokesperson for China’s Ministry of Commerce expressed opposition to the requests from France and Germany for the EU to strengthen trade defense tools.
A report by Radio France Internationale (RFI) on October 6 commented that Maros Sefcovic’s visit to Beijing on October 8-9 carries significant weight as a crucial “last trade negotiation” to avert a potential trade war between China and the EU. The report highlighted that China’s domestic market weakness and oversupply of goods are posing a serious challenge to various European industries, threatening employment and the social fabric in Europe.
Past instances indicate that if negotiations fail, China may resort to various retaliatory measures, including restrictions or bans on the export of strategic metals crucial for energy, defense, and aerospace industries.
English Epoch columnist Milton Ezrati noted that since June last year, the EU and China have been discussing ways to address the bilateral trade imbalance issue. However, the significant trade surplus China holds has not improved, leaving Europe with limited time to devise a new agenda.
Christine Lagarde, the President of the European Central Bank, expressed concerns that China’s exports could weaken the manufacturing sector, a key pillar of Europe’s economic strength. China is now directly competing with the EU in around 40% of the sectors where EU member states claim a competitive advantage, a significant increase from the early 2000s when the ratio was only 25%. Particularly in areas like automotive and semiconductor, Chinese products pose a severe threat to employment and industrial capabilities in Europe.
Complicating matters further, Beijing has explicitly stated its intent to resist any decisions made by Europe. Previously, Beijing thwarted German investigations into the acquisition of a large German retailer by Chinese e-commerce giant JD.com and EU probes into Nuctech, a producer of airport security scanners based in Beijing. Beijing criticized the EU for “abusing extraterritorial jurisdiction” and threatened retaliatory actions. In conclusion, Beijing has shown no signs of reconciliation, setting the stage for a strategic face-off between Europe and China.