Macron calls on EU to take tougher approach on trade with China

French President Emmanuel Macron is pushing for a new European Union (EU) approach to trade relations with China amid concerns that a number of Beijing’s practices are beginning to pose a critical threat to key European industries. According to Bloomberg sources familiar with the position of the French leader, continued inaction, in his opinion, puts the EU economy at risk of long-term damage. As an example, sources cite the crisis of the European solar panel sector, which collapsed 10 years ago due to the availability of an alternative in the form of cheap imports from China. Now officials from the EU believe that the auto industry is at risk, where there is one of two scenarios: strengthen its positions or surrender them to the PRC.

At the same time, in general, Macron does not want a trade war with China (the trade turnover between the EU and China in 2022 amounted to almost $900 billion). According to the agency’s interlocutors, he seeks to build an EU trade model in which Brussels could maneuver between the largest economies and build special relations with potential allies like India.

Macron has long advocated for a rethinking of the EU’s economic goals, calling for the creation of tools to protect declining industries and increase state aid to key sectors. These initiatives are meeting resistance from a number of countries, including Germany, which fears retaliatory obstacles to its exporters. Macron is said to have been prompted to change his approach by last year’s Inflation Reduction Act (IRA), which extended tax subsidies for the purchase of electric vehicles assembled in North America using US-made batteries. The EU expressed concern that such measures discriminate against similar products from US allies and encourage investors to invest in American enterprises.

The European Commission (EC), the agency writes, is cautious about Macron’s ideas for developing a tougher approach towards Beijing: they are concerned about a possible sharp response and, as a result, an increase in tariffs and other economic problems that already exist – high inflation, complete overcoming of the energy crisis etc. In the event of an unforeseen escalation in relations with China, several sectors of the European economy could suffer at once, in particular the production of luxury goods, for which the Chinese market is now key.

At the same time, on September 13, EC President Ursula von der Leyen announced that the European Commission was launching an investigation into Chinese subsidies for the production of electric vehicles, since the world market is “flooded” with cheap Chinese cars (China accounts for 60% of their global production). The EC will have up to 13 months to assess the need for tariffs above the EU standard rate of 10% on cars. The decision drew criticism from China’s Ministry of Commerce, which called it a “protectionist act.”

At the same time, on September 26, EC Deputy Head Valdis Dombrovskis, responsible for trade issues, completed his visit to China. There he called on the Chinese authorities to create fairer and more transparent conditions for foreign business, emphasizing that the EU is discussing a policy of “risk reduction” regarding China, and not “decoupling” (an expression describing a hypothetical severance of economic ties. – Vedomosti). . The EU, he said, does not intend to distance itself from China, but “will defend itself when its openness is abused.”

Brussels is also worried that over the past 10 years, its trade deficit with China has increased more than 3 times by 2022 – to 400 billion euros. In response, Chinese Vice Premier He Lifeng expressed “strong concern and dissatisfaction” with the investigation into electric vehicles.

China reacts sharply to any trade claims from Western countries and will continue to act in this context only more harshly, notes Alexey Maslov, director of the Institute of Asian and African Studies at Moscow State University. Beijing understands that electric cars are only one of the real types of its export products, which the EU can find fault with. Taking into account the existing experience of an insufficient response to the oppression of Huawei, China will simply expel a number of Western technologies from its market in response, Maslov is sure.

The main problem of France in relations with China now is the divergence of economic and political interests, says Pavel Timofeev, head of the department of European political studies at IMEMO RAS. Economically, Paris and the EU are very closely tied to China, and it is very difficult to escape these realities. Politically, France admits that they have different systems and ideologies with China, and does not hide the fact that China is a rival on a number of issues. France is interested in diversifying economic relations and reducing China’s share in EU trade turnover so that, if necessary, economic restrictions can be applied to China more painlessly, Timofeev notes.

The reindustrialization of the European Union can be considered a separate idea of ​​Macron, but here France does not want to depend on China on such key issues as the supply of chips, etc. And India is important for Paris not only as an economic partner, but also as an ally in the Indo-Pacific region , with the help of which you can try to “drag” Europe there and even compete with Beijing and Washington, the expert concludes.