European Union develops new trade tools to curb China reliance: Report
New Delhi, June 8
The European Union's trade commissioner Maros Sefcovic said the bloc is developing new trade instruments to reduce its dependence on China, a new report has said.
"We are using our existing tools more assertively. Where gaps exist, we are also building new tools... Diversification now requires a dedicated instrument," Sefcovic told the annual Brussels Economic Security Forum, according to a report from Euractiv.
Sefcovic warned that the EU's current trajectory of accumulating trade deficits at roughly 1 billion euro a day with China was "clearly unsustainable."
He pointed to last year's disruptions in supplies of rare earths and semiconductor components when China tightened its supply and said that a change in policy was hence necessary. China controls about 90 per cent of global rare‑earth refining and 60 per cent of mining.
Tensions were further fuelled by Beijing's imposition of export controls on Dutch semiconductor company Nexperia. The Dutch company's chips are largely assembled in China and are critical for automotive supply chains.
"Recent industrial cases, in particular supplies of chips and rare earths, have reinforced my conviction that a step change is necessary. We understand the urgency for critical minerals but every high-risk sector must be weaned off single-supplier dependence," Sefcovic said.
Sefcovic urged rapid strategic diversification, adding that the cost of resilience must be integrated into business models and geopolitical risks must be understood as core business risks.
In May, other EU countries such as France and Spain had urged the European Commission to strengthen its trade defence tools against Chinese "overcapacity".
Spain's government, however, then distanced itself from the proposal, after threats of retaliation by Beijing, the report noted.
Denis Redonnet, the EU executive's chief trade enforcement officer, had hinted last week that the Commission would soon propose a new trade instrument to combat Beijing's "very, very intense distortions" of the global economy.
— IANS
Reader Comments
It is surprising to see the EU acknowledge this publicly. For years, they waved the flag of globalisation without considering the strategic risks. Rare earths and semiconductors are the backbone of modern industry - having one country control 90% of refining is not just an economic issue, it is a national security one.
Very interesting article, but I feel there is a bit of irony here. The EU is worried about China's overcapacity and export controls, but they have themselves been imposing restrictive trade measures on Indian steel and other goods. They want diversification, but are they willing to buy more from India? Or just replace one dependency with another? 🤔
The China-plus-one strategy is the only sensible way forward. India has to move quickly to grab the opportunities in semiconductor manufacturing and rare earth processing. But we also need to fix our own policies - ease of doing business needs to improve dramatically. Atmanirbhar Bharat cannot just be a slogan, we need execution!
While this is good news for India as an alternative destination, we need to be cautious. China is not going to just let the EU walk away without a fight. The retaliation against Spain shows they will play hardball. India should prepare for similar pressure if we try to fill this gap.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.