EU leaders to ‘urgently’ call for new trade weapons to tackle China shock
Leaders of the EU’s 27 member states will instruct Brussels to “urgently” come up with new weapons to counter the imbalances they believe are caused by China’s economic policies, at a meeting in the Belgian capital on Thursday. The instruction – part of a draft statement being negotiated ahead of this week’s European Council summit – comes after the European Union and China reached a surprise…
European Union leaders plan to urgently instruct the EU to develop new trade tools to address economic imbalances stemming from China's policies, during a meeting in Brussels on Thursday. This directive is part of a draft statement being finalized ahead of the upcoming European Council summit. The proposal emerges following a surprise agreement between the EU and China in Beijing, which caps the number of Chinese hybrid cars allowed into the bloc at 350,000 per year.
While the agreement mitigates the risk of a trade war, EU officials emphasize that it falls short of their expectations and that the EU intends to maintain pressure on China to moderate its exports across various sectors.
According to a senior diplomat, a single positive outcome, such as this deal, does not signify a full resolution, but it represents a starting point for the EU to push China to temper its export practices. The language used in the document avoids directly naming China, reflecting the EU's cautious approach to avoid a direct confrontation with the world's second-largest economy. However, the document employs terminology often associated with the perceived negative impacts of China's industrial dominance on the EU economy.
The statement, confirmed by the South China Morning Post and subject to change before the summit, outlines the EU's desire to enhance its "toolbox" with new instruments to better manage these economic imbalances. The European Council is expected to discuss these issues during lunch and urge the European Commission, which oversees trade policy for the 27 member states, to develop new instruments by the year's end.
Two such instruments have already been announced: a diversification tool to compel companies to diversify their supplier base and a "solidarity mechanism" to compensate businesses affected by Chinese retaliation. However, diplomatic sources anticipate that several leaders will support a Franco-German proposal for a "kill switch" mechanism.
This mechanism would swiftly expel countries or firms from the EU market if they engage in coercive behavior. Despite speculation that the recent agreement on hybrid cars might deter further action, sources are confident that this outcome does not diminish the urgency for additional trade measures. Multiple well-placed sources believe that the agreement demonstrates the effectiveness of a two-pronged approach: engaging in dialogue with China while simultaneously developing new trade instruments behind the scenes.
The involvement of Germany, in particular, is seen as a significant boost to these efforts, as German Chancellor Friedrich Merz has affirmed the EU's resolve to respond robustly to any actions that harm its economy, including through high subsidies, currency manipulation, overcapacity, and aggressive pricing.
Written by urgent.news from South China Morning Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
