EU's push to reduce reliance on China could come at a price
Brussels is preparing a new tool to shield the EU economy from countries weaponising its strategic dependencies. But European businesses fear the costs of diversification - and question which sectors will be targeted.
In early December, the European Commission plans to introduce a tool aimed at urging companies to diversify their suppliers and lessen their strategic reliance on a single nation. While China won't be explicitly named, the proposal is clearly directed at Beijing, which previously halted rare earth exports in 2025 during a trade war with the US. The EU car industry faced similar issues after Beijing cut off access to essential chips in a dispute with the Dutch government.
The urgency of diversification arises in sectors where dependencies create economic vulnerabilities. The Commission, in consultation with EU businesses, defined the new instrument's purpose as addressing situations where a dominant supplier country could jeopardize the EU's security of supply and economic security.
Companies expressed concerns that alternative suppliers would raise their costs. BusinessEurope's Deputy Director General, Luisa Santos, noted that companies are already operating at the highest level to maintain cost-effective structures. However, EU Trade Commissioner Maroš Šefčovič emphasized that industry would be "on the front line" of diversification efforts, and businesses must incorporate the "cost of resilience" into their models.
The proposed diversification tool's scope and criteria remain unclear. Santos clarified that while diversification is necessary, not all dependencies should be considered problematic. For instance, EU dependency on Chinese electric appliances should not fall under the instrument's purview.
The minimalist scenario, akin to the Energy Union's approach during the Russia-Ukraine war, would confine diversification to specific sectors like energy utilities. Conversely, a maximalist scenario could impose tariffs on companies purchasing excessive amounts of a product from a single source, incentivizing them to seek alternative suppliers. This broader approach would impact critical sectors like green technologies, defence, digital industries, and infrastructure.
Written by urgent.news from Euronews Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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