The European Commission promises tougher actions on trade with China

The EU's relationship with China in terms of trade and investment is "not sustainable", according to the European Commission, which pledged a stronger response. Commissioners were discussing how best to protect Europe's industries against surging Chinese imports.

The EU's leaders will meet on June 18-19 to discuss ideas. Possible proposals include forcing EU companies to diversify their supply chains, or introducing new trading mechanisms to limit China's access the EU's market for chemicals, metals, and clean energy technologies.

The Commission stated that "as economic and security concerns become more intertwined and complex, both dimensions require a more robust and coherent response."

Concrete proposals for the response will not be announced before the third quarter of this year.

Western governments, especially in the U.S., are trying to reverse the trend of offshoring from their countries to China, which peaked during the early 2000s. This has led to a loss of industrial know-how and hubs.

Focus on Trade Imbalances, Overcapacity

At a summit in mid-June, the Group of Seven wealthy nations will address trade imbalances and overcapacity. China is increasingly asserting its dominance when it comes to rare earths, other metals, and energy.

Donald Trump, President of the United States, has pushed "America First". In the beginning of this year, RESourceEU, a new policy to "Buy European", was proposed by the EU to speed up the development and implementation in the EU, as well as the partnership with mineral-rich nations from Central Asia, Australia, and Brazil.

China's Foreign Ministry has accused the EU of selectively using trade data to justify claims of unfairness. It has also repeatedly threatened "strong measures" if the EU adopted "Buy?European?" and revised policies on tech sovereignty. China rejects any notion that its trade policies are unfair.

Europe's industrial sector faces a more difficult climate than its American counterparts due to higher energy costs and tighter regulations.

Stephane Sejourne, the Industry Commissioner of the European Union, said that he wanted to use existing trade tools like import quotas and duties "more systematically", rather than targeting particular companies or materials.

The EU has attempted to limit some Chinese imports with mixed results. The EU imposed tariffs only on heavily subsidised Chinese electric cars, not hybrid models. Nearly 40% of all new car registrations in Europe were hybrids.

The Commission wants to be more aggressive, but it must 'navigate differences between France and Germany? in order to pass major legislation.

Carsten Nickel wrote in a Teneo report that "Paris argues the Europe's open markets?is absorbing combined effects of Chinese subsides and US protectionionism".

Nickel stated that "Germany's situation is more contradictory" due to the mounting pressures on German manufacturing and the dependency of large industrial groups on China. (Reporting and editing by Helen Popper; Julia Payne)

(source: Reuters)