The European Union is preparing to implement emergency measures to address a significant rise in Chinese exports, following new data that revealed a notable increase in the trade deficit, the bloc’s chief trade representative said on Tuesday.
Deni Redonne, Deputy Director-General for Trade at the EU, informed the European Parliament’s Trade Committee that safeguard measures, which permit the use of tariffs and quotas to counter sudden surges in imports, could be “legitimate in each specific case”. The EU does not anticipate that Beijing will make structural changes to its economic model.
Chinese trade data released on Tuesday indicated that in the first half of the year, the trade surplus with the EU rose by 23.7% in dollar terms. For Germany, Europe’s largest economy and its primary trading partner with China, the surplus increased by 80.8%, according to calculations based on official data.
Growth of the Deficit and Germany’s Position
On Monday, German Chancellor Friedrich Merz reiterated his accusation of artificial yuan devaluation, which some economists argue contributes to the rise in Chinese exports. “We are now trying to steer the dialogue with China towards a solution… attempting to persuade China to allow its currency to fluctuate freely, particularly in the context of competition in capital markets,” said Merz.
Brussels and Beijing are working to ease trade tensions, but the EU has warned it will be compelled to act if there is no progress in reducing the trade imbalance by October. Redonne noted that structural rebalancing will not occur by that deadline, and the EU will consider a range of sectors to initiate rebalancing and limit export levels. He added that due to surges in imports, “it may be that we also find ourselves in situations where emergency trade protection instruments, such as safeguard measures, become legitimate and necessary in each specific case”.
Redonne stated that China’s economy poses a “global macro-industrial challenge” for the EU and many regions worldwide, and the outlook is “alarming”. The EU expects China’s share of global production to rise from the current 37% to 45% by 2030, which he described as “a significant increase in what is becoming a form of industrial dominance”.
“There are no signs of macroeconomic adjustment in China, and no indications that the structural characteristics I mentioned are fundamentally changing,” said Redonne, adding that the analysis of the latest five-year plan “seems to confirm this trajectory”.
Future Measures and Diplomatic Efforts
Redonne confirmed reports from the South China Morning Post that at a ministerial meeting last month, Beijing proposed procurement commitments to reduce the deficit, “particularly where trade is conducted through government procurement or state trade”. Discussions also included reducing or eliminating tariffs and non-tariff barriers in sectors such as agri-food products, pharmaceuticals, medical devices, and cosmetics.
The coming months are expected to feature intense negotiations between the two sides, but the EU is also likely to implement additional protective measures. Last week, the European Commission launched an anti-dumping investigation into the import of Beijing ducks, a rare case targeting the Chinese agricultural sector. This followed the introduction of anti-dumping duties on Chinese tires ranging from 4.3% to 45.3%. Redonne stated that “it is more than likely that unilateral protective measures will be taken at the EU level”, as sectors that form the “backbone” of the European economy face “steep growth” in Chinese supplies.
Representatives from China and the EU are scheduled to meet by the end of July to discuss a new “joint monitoring mechanism”, which will allow both sides to use the same pre-agreed data to track the growth of Chinese imports into Europe. Redonne confirmed that he will hold talks with China’s Deputy Minister of Commerce Lin Ji in August and visit China in September. Meanwhile, the head of the EU’s trade department, Maros Sefcovic, is expected to meet with China’s Minister of Commerce Wang Wentao in September before traveling to Beijing in early October. Redonne emphasized that the aim of these efforts and other measures is to avoid “an unconscious movement on two levels: not to allow excessive dependence and not to get involved in an unnecessary trade war with China”.
Source: South China Morning Post
