The EU’s trade deficit with China is exploding, and the EU’s heads of state and government are beginning to panic. China’s exports to the EU have risen by 16 per cent in just one year. The deficit amounts to €1 billion per day. This is not something the EU can live with over time, and it is preparing for a trade war.
The leader of the EPP Group in the European Parliament, the social democrat Manfred Weber, does not mince his words:
‘Either we defend ourselves, or China will destroy parts of our industry,’ Weber told the German newspaper Bild.
The backdrop is that the European market is now being flooded with cheap Chinese goods after China’s trade war with the United States put a stop to much of its exports there.
China’s exports to the EU are now more than 16 per cent higher than at the same time last year, writes the Financial Times.
The EU’s trade deficit with China now amounts to €1 billion per day, according to The Guardian.
A thorn in the EU’s side is China’s extensive state support for various industries. This gives Chinese companies a competitive advantage.
The EU is accustomed to treading softly in relation to China, and President Antonio Costa did not even mention China in the background material for the meeting. Others are more direct:
Beijing has also launched a campaign to prevent the EU from adopting new measures to slow Chinese imports, and earlier this month China cancelled two important diplomatic meetings with the EU at short notice, according to the FT.
Beijing is said to be particularly dissatisfied with the EU’s new industrial legislation and the ‘Buy European’ decision.
EU diplomats, for their part, are clear that ‘macroeconomic imbalances’ is synonymous with China.
‘Of course it is China we are talking about,’ say two senior diplomats.
They believe that the EU must sharpen its trade policy instruments to meet what they regard as unfair competition from China, but reject the suggestion that this amounts to provoking conflict.
‘This is a reaction. It was they who started it,’ says one of the diplomats.
But Costa prefers to talk about macroeconomic imbalances, not a trade war.
‘I want us to focus on global macroeconomic imbalances and their implications for Europe’s competitiveness and prosperity. The goal is to develop a common understanding,’ he writes.
If the EU prioritises internal compromise, it will end up suffering defeat at the hands of China, which is paying close attention and knows where to apply pressure.
On top of everything else, forces in Brussels want to reallocate money in the budget from agriculture and support for rural and poorer regions to rearmament.
The EU’s next long-term budget, known in the Brussels bubble as the MFF (Multiannual Financial Framework), also appears set to create waves at the summit.
This is about far more than dry figures. The new budget could largely shape the EU’s future and transform the Union from a trading bloc into a security and defence policy bloc. Support for agriculture and poorer regions could be scaled back in favour of more money for industry and defence.
But several countries, including Austria, Sweden and the Netherlands, have firmly rejected the proposal put forward by the European Commission. The proposal of €1,730 billion would require the countries to contribute 1.26 per cent of their gross national income (GNI), compared with the current 1.1 per cent.
Drastic cuts are needed here, Sweden’s Minister for EU Affairs Jessica Rosencrantz recently stated.
‘I am as outraged as I am disappointed. The cuts are barely visible and far from sufficient,’ she said. (NTB)