Brussels is open to developing a powerful new trade weapon that could contain a kill switch that would quickly eject Chinese companies from the EU market, the bloc’s national leaders were told during a top-level meeting in the Belgian capital on Thursday.
There was broad support among the 27 members for such a tool, first laid out in a French-German joint paper last week, with European Commission President Ursula von der Leyen signalling that her trade team could get to work on developing it, according to people briefed on the talks.
Von der Leyen presented the “kill switch” as an option during her opening presentation to the other leaders on Thursday, sources confirmed.
As described in the joint paper, the instrument would allow Brussels to respond rapidly to systemic distortions and coercive behaviour, potentially immediately. It would grant dramatic new powers to the commission, the EU’s executive branch, which manages trade policy for the union.
Furthermore, von der Leyen identified chemicals and industrial machinery as the top priority industries the EU needs to shield against Chinese imports during a meeting between the EU’s top leaders in Brussels on Thursday.
She told members that the EU should consider quickly introducing safeguard measures, which can involve import quotas and tariffs, to shield these sectors from a wave of cut-price alternatives from China, according to people familiar with the discussion.
Her motion was endorsed by influential member states, including France, Germany, Belgium and Denmark, while the wind turbine industry was also mentioned during the debate as one that needs intervention to alleviate pressure from Chinese imports, one of the people said.
The bloc is currently running the numbers on these sectors using a monitoring mechanism it created to identify surges in imports.
The discussion happened over a nearly two-hour lunch at the European Council summit in the Belgian capital, during which von der Leyen presented the results of several rounds of talks with the Chinese government, including an agreement that will see the EU cap imports of Chinese hybrid cars at 350,000 a year from 2027.
In response, Beijing on Friday called for dialogue to address China-EU differences.
“We hope the European side will abide by its commitments to openness and free trade, adhere to WTO rules, and avoid introducing protectionist and discriminatory policy measures,” Chinese foreign ministry spokesperson Mao Ning told a press conference.
The South China Morning Post reported on Thursday that the EU was planning to open safeguard investigations in the chemicals, pharmaceuticals and machinery industries in the coming weeks. Politico first reported von der Leyen’s recommendation to EU leaders at the council summit.
Multiple sources said that member states had lent “unanimous support” to the commission’s current approach – a two-pronged strategy of negotiating with Beijing while at the same time sharpening its own trade weapons.
The dialogue is seen to have delivered results and working-level talks with Beijing continue. Meetings are set for their respective trade chiefs in January and March. But officials believe that the bloc cannot wait that long before acting to protect certain industries, sources said.
This has led to a groundswell of support for more immediate intervention. Conclusions from the summit called for the commission to “urgently enhance the EU toolbox with new instruments to better address these imbalances”.
In the meantime, safeguards are the preferred form of trade defence, since they can be implemented relatively quickly and can target more than one product at a time.
Member states also rallied behind other elements in the joint paper, which urged a revamp of how the bloc uses its trade instruments, namely to make the process faster. Currently, it can take months or even years before a trade investigation is concluded, by which stage the damage is already done.
The sum total is that members generally support further action against China, which could see a new spike in tensions, less than a week after the sides reached an agreement in Beijing that many thought would act as a salve.
One of the people said that all of the member states who took the floor during the debate – during which the leaders dined on a main course of veal with a dessert of fig tart – spoke supportively of using caps to prevent a flood of Chinese exports in important sectors, such as that agreed in the hybrid car sector.
“Fundamentally, I think it is a good idea to maintain a dialogue with China and see whether trade agreements can be reached,” said Danish Prime Minister Mette Frederiksen, arriving at the talks.
“But as far as I can tell, China is not complying with the established rules governing trade between countries, and therefore Europe must be prepared to respond with the same firmness, if you will, as what we are witnessing from the outside.”
Luxembourg’s premier Luc Frieden said the bloc needed to take “appropriate measures” against those countries who give their firms “unacceptable state aid”.
“We have to protect our market while staying free-trade supporters, but free trade also means fair trade,” Frieden said.
Speaking to the Financial Times, meanwhile, German Chancellor Friedrich Merz signalled that his country’s dramatic pivot on China was here to stay.
“We will widen the toolbox, we will open the toolbox, we will show the toolbox and we will make use of the toolbox if needed,” he told the newspaper. -- SOUTH CHINA MORNING POST
