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E.U. Takes Aim at China in Proposed Economic Strategy

A European Commission plan seeks to bar companies from sending sensitive high-tech goods to potentially hostile countries — without naming any names.

The European Commission on Tuesday unveiled a new trade doctrine aimed at curbing China’s ability to squeeze Europe’s economy, and at preventing European companies from exporting sensitive, military-linked technology that could give China an edge.

The policy, still in its early stages, highlights how the European Union is seeking to align itself with the United States in limiting China’s access to sensitive markets and industrial secrets. It also reflects growing concerns about Beijing’s deepening alliance with Moscow.

The announcement in Brussels came in a busy week for Europe-China relations. The Chinese premier, Li Qiang, is visiting Germany, where he met with Chancellor Olaf Scholz and business leaders on Tuesday before heading to meetings in France.

The initiative also underscores how the European Union, one of the world’s biggest economies and a key trade partner to both China and the United States, is trying to manage its economic dependence on Beijing and avoid the kind of economic breakup with Russia that followed the invasion of Ukraine.

The commission, the European Union’s executive branch, said in a 14-page document that poor coordination among the member states and weak trade rules could allow adversaries to have an economic chokehold over E.U. economies or manufacturers, and needed to be urgently addressed.

“More than ever our national security is deeply intertwined with our ability to be economically safe and resilient,” the paper said.

The document didn’t once mention China, or any specific countries, but rather made reference to “destinations of concern that operate civil-military fusion strategies.”

Two people carrying papers enter a room.
Ursula von der Leyen, right, the president of the European Commission, with Johannes Hahn, the European commissioner for budget and administration, in Brussels on Tuesday.Credit…Olivier Hoslet/EPA, via Shutterstock

Ursula von der Leyen, the president of the European Commission, said in comments to reporters that the policy was “country agnostic” and wasn’t aimed at overhauling how the bloc engaged with economic powers. Rather, she said, “we’re looking at a limited, small set of cutting-edge technologies,” adding: “And here, we want to make sure that they do not enhance the military capacities of some countries of concern.”

But European diplomats said the proposed economic strategy was clearly about China. They said it would probably take several months of debate before it became concrete policy but was an essential first step toward preventing economic goals from undermining the European Union’s security.

Still, diplomats said the bloc’s biggest economic powers — Germany, France, Italy and the Netherlands — were not eager for what could be disruptive intervention from Brussels in their critical economic relationships with China. Those concerns could set the scene for a watering-down of the commission’s proposals.

The meetings in Germany on Tuesday were muted and avoided the elephant in the room: the German economy’s dependence on China. More than a million German jobs depend directly on China, and almost half of German manufacturers rely on China for some part of their supply chain.

After their meeting at the chancellery, Mr. Scholz and Mr. Li read statements but took no questions.

“Direct dialogue, personal conversation, real exchange — all this is even more important than usual in this extraordinary time full of global challenges and crises,” Mr. Scholz said, skirting thorny issues and choosing instead to focus on climate and green energy.

“We have no interest in economic decoupling from China,” he said. Mr. Scholz also avoided mentioning de-risking economic relations with China — a milder approach to easing dependence that has quickly gained traction in diplomatic parlance.

Mr. Li, however, did bring up the term later in the day. “Imposing discriminatory measures in the name of de-risking to restrict or exclude other countries is contrary to market principles as well as the rules of fair competition and the rules of the World Trade Organization,” he said, according to the DPA, a German news service.

The European Commission proposal on economic security said the bloc should keep potentially hostile countries and their companies out of certain critical infrastructure, such as ports and pipelines, and bar European Union companies from exporting high-tech goods with military uses to potential adversaries.

The document also aims to ensure that supply chains for security-sensitive goods are not overly dependent on such countries, and to stop proprietary European technologies in artificial intelligence, chip-making or biotechnology from “leaking.”

The bloc already has a set of rules that seek to address some of these concerns, but the commission said that much better and stricter rules were needed, and that they should be applied with the same zest and standards across the 27 nations. The goal, the document said, is to make sure that there are no back doors to undermining European security.

“The need for more rapid and coordinated action at E.U. level in the area of export controls has become pressing,” the proposal said, noting that “an uncoordinated proliferation of national controls by member states would create loopholes.”

Some European countries have already tightened their trade relations with China, with the Netherlands this year barring the firm ASML from exporting its advanced chip production technology there on security grounds.

The bloc is also considering targeting Chinese companies with sanctions because they are providing Russia with chips used in weapons deployed against Ukraine.

Source : The New York Times