EU ready to use all trade tools to defend against China, says Ursula von der Leyen

The European Union is prepared to deploy all the tools available to defend its economies if China fails to offer fair access to its markets, European Commission president Ursula von der Leyen said.

She said heavily subsidised Chinese products such as electric vehicles and steel are flooding the European market and said the world cannot absorb China’s surplus production.

Ms von der Leyen spoke after talks in Paris on Monday with French president Emmanuel Macron and Chinese president Xi Jinping, who is on a state visit to France before heading to Serbia and Hungary in his first trip to the bloc in five years.

But the EU is lobbying China to exclude agriculture from the series of escalating commercial disputes between the two sides, calling for the “strategic sector” to be protected from trade tensions in the renewable energy and electric vehicle industries.

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“My intention is to do everything which is possible to avoid the situation that agriculture is a victim of the problems in other sectors,” EU agriculture commissioner Janusz Wojciechowski said in an interview during a visit to Beijing late last month.

Mr Wojciechowski added that he told “Chinese partners” that “we should treat agriculture as a sector which requires special protection ... as a strategic sector, strategic for security”.

The EU is China’s second-largest trading partner, but tensions have been rising over Brussels’ accusations that Beijing is fuelling industrial overcapacity to boost disappointing economic growth, raising fears of dumping in European markets.

“For trade to be fair, access to each other’s market also needs to be reciprocal,” Ms von der Leyen said on Monday. “We discussed how to make real progress on market access. I remain confident that more progress can be achieved. At the same time, we stand ready to make full use of our trade defence instruments if this is necessary.”

She cited the example of the International Procurement Instrument created in 2022 and which was used for the first time last month to launch an investigation into China’s sourcing of medical devices. Brussels could ultimately restrict Chinese access to tenders if it finds a lack of reciprocity.

“Europe cannot accept market-distorting practices that could lead to deindustrialisation,” Ms von der Leyen said.

[ China’s Xi Jinping to begin Europe visit amid tensions over industrial policy and Ukraine war ]

The EU is becoming tougher on trade relations with China, echoing US concerns about state-fuelled overcapacity in green industry. The rhetorical shift was put into practice when the EU launched an investigation into subsidies for Chinese electric vehicles in the fall of 2023 that could see new tariffs introduced by July. Its also scrutinising other industries such as wind energy, solar and railways.

China has denied generating overcapacity and accuses the EU of protectionism.

And the country has not stood idly by as Europe becomes more assertive. In January, Beijing launched an anti-dumping investigation into liquor products, a move that could hurt France’s cognac producers disproportionately. Producers called for a deal to resolve the issue during Mr Xi’s visit, warning that the beverage represents 70,000 direct and indirect jobs in France.

The Chinese leader also rebuffed pressure from German chancellor Olaf Scholz on a trip to China last month to reduce what western officials see as excess manufacturing capacity.

Ms von der Leyen said she encouraged the Chinese government to address “structural overcapacities” as China “continues to massively support its manufacturing sector” while domestic demand fails to grow.

“A China that plays fair is good for all of us,” she said. “At the same time, Europe will not waver from making tough decisions needed to protect its economy and its security.”

Moments before Mr Xi arrived at the Elysee Palace on Monday, French finance minister Bruno Le Maire signed a pact with France’s auto sector that seeks to safeguard and ramp up production of EVs on French soil. That includes commitments to continue limiting cash support for consumers to vehicles with the lowest environmental footprint – a move that de facto excludes many Chinese EVs. – Bloomberg / Financial Times Limited 2024

[ Xi Jinping meets US business leaders seeking to mend China ties ]