The European Union is grappling with a complex challenge: aiming to strengthen its presence in the global economic landscape while diminishing reliance on Asia’s powerhouse.
Balancing security apprehensions with the necessities of supply chains and country-specific export goals has proven difficult. Furthermore, disputes over state aid further complicate matters.
Navigating this intricate web will be tough for European Commission President Ursula von der Leyen.
Von der Leyen voiced concerns over Beijing’s geopolitical maneuvers on July 31, but she’s also aware of the importance of maintaining trade ties. While EU leaders are keen for Europe to minimize risks, they don’t want to sever ties or become insular.
This is largely because China stands as the EU’s third-largest export destination and its primary import source.
Consider the electronics and semiconductor sectors. Last year, they sourced goods worth 32 billion euros from China and recorded exports totaling 13 billion euros, as per Eurostat figures.
Consequently, firms like the Dutch semiconductor equipment producer, ASML, find themselves torn between Europe’s security goals and their own commercial imperatives.
The U.S., being Europe’s principal export destination, urges the EU to adopt a more stringent stance on Beijing. However, Washington’s subsidy-laden Inflation Reduction Act might inadvertently push the EU towards China due to its protective tendencies.
Individual European nations often send mixed signals, letting Brussels advocate a more rigid approach towards China while domestically promoting stronger bilateral relations to foster job creation and economic growth.
As François Chimits from the Mercator Institute for China Studies observes, these nations conveniently oscillate between appearing stern and appeasing Beijing.
Germany recently introduced its inaugural China-focused strategy, emphasizing stricter export and supply-chain controls.
Yet, it also acknowledges the concerns of major businesses like Volkswagen and BASF, emphasizing the significance of uninterrupted trade.
France, contrastingly, leans towards guarding against perceived unfair Chinese financial aids and suspected underpriced goods.
While the Commission has enacted anti-dumping measures on specific sectors, such as optical cables and tungsten carbide, its hands are tied in other areas.
For instance, imposing sanctions on China’s electric vehicle sector would be challenging due to the intricate supply chain.
It’s evident that the EU views China more as a competitor than an adversary. Unity among its 27 members will be vital to devise a sustainable strategy.
Von der Leyen’s task is to steer clear of trade conflicts and subsidy competitions, all while keeping an eye on potential security threats. It’s a tall order, but it’s a responsibility she must shoulder.
