European Union flags flutter outside the EU Commission headquarters, in Brussels, Belgium, February 1, 2023. REUTERS/Yves Herman Acquire Licensing Rights
BRUSSELS, Aug 16 (Reuters Breakingviews) – On China, the European Union is trying to square the circle: play a bigger role in the global economy while reducing its dependence on the Asian giant. Security concerns clash with supply-chain needs and national export ambitions, while state-aid spats gum up the works. European Commission President Ursula von der Leyen will struggle to find a way forward.
Von der Leyen on July 31 criticised Beijing for its geopolitical stances, but she needs to keep trade flowing. The EU’s heads of state and government want Europe to “de-risk”, but not decouple or turn inward. That’s because China is the EU’s third-largest export market and biggest source of imports.
Take the electronics and semiconductor industry. It imported 32 billion euros’ worth of goods from China last year, but it also notched up 13 billion euros in exports, according to Eurostat. As a result, companies like Dutch chip equipment maker ASML (ASML.AS) are caught between Europe’s security aspirations and their business needs.
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The U.S., Europe’s biggest export market, wants Brussels to follow its lead in cracking down on Beijing. But Washington’s subsidy-heavy Inflation Reduction Act may also drive the EU closer to China because of its protectionist bent.
National governments play both sides by leaving Brussels to pursue a tougher China policy while touting closer ties at home in the name of jobs and growth. As François Chimits of the Mercator Institute for China Studies says, they “play the good cop and cuddle the Beijing bear” when it suits them.
Germany’s first national strategy on China, released last month, sought a tougher line on export controls and supply-chain risks while also heeding calls from manufacturers like carmaker Volkswagen (VOWG_p.DE) and chemical group BASF (BASFn.DE) to keep commerce flowing. France, on the other hand, is pushing for a more protectionist line against Chinese subsidies and what it views as artificially low prices.
The Commission has imposed anti-dumping duties on select industries like optical cables and tungsten carbide, but there are limits. Brussels would have a tough time crafting penalties on China’s electric car industry, for example, because the supply chain is convoluted.
The EU seems clear that China is a rival but not an enemy, and that the bloc’s 27 member states will need to cooperate to find a way forward. Von der Leyen’s challenge will be to avoid a trade war or subsidies race while also being mindful of security threats. It won’t be easy, but she has to try.
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
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CONTEXT NEWS
European Commission President Ursula von der Leyen on July 31 criticised China’s increasingly militant stance in the Indo-Pacific region and called on the Philippines to join the EU in economic “de-risking”.
In 2022, China was the EU’s largest trading partner for imports of goods and third-largest for exports, according to Eurostat.
Germany on July 13 said China was a partner, a competitor and a systemic rival in its first national strategy toward Beijing. The EU on Aug. 9 doubled anti-dumping duties on imports of optical cables from China and renewed duties on tungsten carbide imports, part of ongoing efforts to protect EU suppliers from what it assesses to be unfair Chinese competition.
Editing by Francesco Guerrera and Oliver Taslic
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