The EU has changed its approach
European investigators on Tuesday raided the Dutch and Polish offices of Nuctech, a maker of security scanners once run by Hu Haifeng, the son of President Xi Jinping’s predecessor, Hu Jintao. The checks took place in a case related to one of Europe’s oldest grievances with China — the generous state subsidies that help Chinese firms undercut European rivals.
China’s mission to the EU said at the time that the raid “highlights the further deterioration of the business environment in the EU and sends an extremely negative signal to all foreign companies”.
The move, which Politico notes marks a definitive shift in how Europe is prepared to address its trade issues with China, came as Chinese President Xi Jinping prepares to make a trip to Europe next month. It is the first trip to the continent in the last five years of the leader from Beijing, who will arrive in France, Serbia and Hungary.
After years in a row in which the EU took a soft tone towards China, seeking dialogue instead of direct confrontation and a trade war, “now the gloves have been taken off,” the quoted publication writes. All while growing political consensus that Europe needs to protect essential technologies.
“Competition yes, dumping no”, says the head of the European Commission
Last October, Brussels launched an investigation into China’s state support for electric vehicles, and now the EU is following up with investigations into wind turbines and hospital equipment to “rebalance the EU-China partnership”.
“We like fair competition. What we don’t like is when China floods the market with massively subsidized electric cars. This is what we are fighting against. Competition yes, dumping no. This must be our motto”, emphasized, on Wednesday, the head of the European Commission, Ursula von der Leyen.
Over the past nearly ten years, the European Commission has been preparing a stronger trade defense arsenal, which includes the international public procurement tool and aims to take action against China if it excludes European companies from public tenders.
“For a long time, we have talked about the fact that the European Commission has this toolbox. But I questioned the ability of the European Commission to use this toolbox effectively. Now we see that, in fact, the European Commission is able and willing to use it,” said Francesca Ghiretti, senior geoeconomics analyst at the Adarga Research Institute.
Advantages and dangers
Europe’s tougher stance toward China comes with a number of advantages and dangers, Politico notes, adding that the EU’s firm stance may be good news for those disenchanted with the soft approach so far. At the same time, however, “Europe must be prepared for a counterattack from Beijing and for a stormy period of trade conflicts,” adds the cited source.
At the same time, the United States is closely watching the EU’s plans for China, shortly after this week’s announcement of a medical device investigation, with Katherine Tai, the US trade representative, saying she was following the situation with “interest”.
In addition to the subsidy investigations, there is growing pressure within the EU to respond to China’s massive Belt and Road infrastructure investment projects, through which it helps build ports and roads to link Asia to European markets.
An internal European Commission document obtained by Politico shows that the EU bloc needs to focus more seriously on strategic mining and energy interests in Africa and Central Asia.
Also in the field of clothing, the EU has to deal with the commercial impact caused by the Chinese app Shein.
In that context, two sources told Politico that Brussels is close to designating Shein as a “very large online platform” in the coming days, meaning it may be subject to further scrutiny under European content moderation law.
Beijing’s reaction is awaited
China tends to come up with a response every time Europe raises the stakes on trade, the publication said, noting that in several situations Beijing has proven its ability to use a “divide and conquer” strategy in relation to countries European. He has threatened, for example, to favor Boeing planes over Airbus or not to buy French and Spanish wine.
It also in 2013 forced European Trade Commissioner Karel De Gucht to drop his offensive against China’s telecoms and solar industry, and more recently cracked down on supplies of gallium and germanium, two materials used in chip manufacturing. The move came after the US pressured the Netherlands to block some of ASML’s sales of advanced equipment to China.
Shortly after the head of the European Commission launched the investigation into electric vehicles made in China, Beijing hit out at Europe’s alcohol exports, specifically targeting France’s cognac sector, with Paris being the main backer of the vehicles case electrical.
“If von der Leyen doesn’t pull the trigger now, then when?” said one EU diplomat, referring to the June 9 European Parliament elections that will change leadership in Brussels and Ursula von der Leyen hopes to a new mandate at the head of the community executive.
“There is always the risk of retaliation”
“The willingness to get tougher on China also comes as Europe rethinks its reliance on autocracies after Russia’s invasion of Ukraine,” Politico notes.
NATO’s secretary general said Thursday in Berlin that “in the past, we made the mistake of becoming dependent on Russian oil and gas.”
“We must not repeat this mistake with China, depending on its money, raw materials and technologies,” the head of the alliance stressed.
Gunnar Wiegand, a former diplomat for Asia at the European External Action Service and a fellow at the German Marshall Fund, says there is “always a risk of retaliation” but that “shouldn’t deter anyone in the EU from using the carefully designed tools , which are all fully compatible with the WTO (World Trade Organization)”.
“It would be a mistake not to use these tools for fear of retaliation,” Wiegand points out.
Photo: Hepta
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