The EU is preparing to curb Chinese imports of chemicals and industrial machinery, following a successful deal with Beijing that capped hybrid car exports to the bloc.

The European Commission “showed openness” to proposing safeguards, referring to an emergency brake on imports that can cover entire sectors, an EU diplomat told EUobserver on Thursday (15 October).

And there was “broad support” for the idea among member states for the commission to proceed, the diplomat said.

Last week, trade commissioner Maroš Šefčovič agreed with Beijing to cap imports of Chinese hybrid cars at 350,000 next year, which was less than half the amount expected this year.

He called the deal a “blueprint” for other sectors, a view which was publicly echoed by EU Commission president Ursula von der Leyen, also on Thursday. 

Under World Trade Organization (WTO) and EU rules, anti-dumping and anti-subsidy cases require Brussels to prove that Chinese firms sell at unfairly low prices or receive subsidies.

Safeguards do not need evidence under WTO rules, which allows them to be used as an emergency measure.

And the commission only has to show that a surge in imports is seriously harming European producers. 

“We like the idea, chemicals, machinery where there’s still a lot of Chinese overproduction needs to be managed,” said another EU diplomat.

The instrument had its limits: Safeguards have to apply to all countries, not just China, and can last no more than eight years.

The EU rarely uses WTO safeguards, but did so on steel, also aimed at China, which expired in June, after reaching the eight-year limit, and which have since been replaced by a separate EU steel regime.

And the Centre for European Reform, a prominent think-tank in Brussels, previously suggested exempting the EU’s 76 free-trade partners from safeguards so that the measures fell mainly on China.

It was a legal moot point in the WTO if that was OK, but the EU has done something similar before. 

Norway, Iceland, Liechtenstein, and 10 other countries were left out of the steel safeguard, but using this tool to address Chinese imports was still seen as a temporary solution.

Before the end of the year, the EU commission aims to present diversification tools to reduce reliance on Chinese goods, as well as a mechanism to compensate companies hit by Chinese countermeasures.

And the package would include an instrument to shut Chinese companies out of the EU market if need be, in a measure first proposed in a Franco-German paper last week.

When the oil supertanker Esteem Explorer sails from the United States to Japan in late November, loaded with about 2 million barrels of crude, the journey will cost $81 million. The same journey would have cost $9.1 million last year, on average.

Europe’s trade deficit with China reached a record $34.8bn [€31bn] in September, as EU leaders meet in Brussels on Thursday (15 October) to discuss Europe’s competitiveness agenda and what they call “macroeconomic imbalances” — a euphemism to avoid mentioning China by name.

EU heads of state and government are expected to give a mandate to the EU Commission to propose a set of trade defence measures and tools to reduce the EU’s reliance on Chinese industry, based on a new Franco-German blueprint, as a united front spreads across the bloc. 

There was a move towards a “surprising unitary position” on Beijing among member states, said an EU diplomat, ahead of a two-day summit in Brussels which began on Thursday (15 October).

A joint letter and policy paper submitted by French president Emmanuel Macron and German chancellor Friedrich Merz to commission president Ursula von der Leyen last week was viewed by many EU diplomats as marking a decisive shift towards a more consolidated EU stance on trade relations with China. 

“For a long time, there were significant differences between these two countries on how to deal with China, how to address the economic situation,” parliament president Roberta Metsola told reporters on Thursday. 

The diplomat added that the commission’s trade diversification package, designed to reduce the bloc’s reliance on Chinese industrial inputs and curb Chinese exports, will be presented by the end of the year and will be based on the Franco-German paper. 

But the commission, for its part, has downplayed the prospect of rapid progress to EU-Chinese trade statistics. “It’s an issue which is not going to be solved in a couple of months,” said one official. 

‘Be ready for escalation’ but do nothing

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