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The European Commission has cast aside German Chancellor Friedrich Merz’s suggestion to pursue a trade deal between the European Union and China, calling instead on Beijing to “meaningfully” address its distortive economic practices.
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The bloc, like most developed economies, is struggling to contain a ballooning trade deficit with China, which has turned to low-cost exports to offset a persistent real estate crisis and sluggish consumer demand. The imbalance has raised serious concerns of unfair competition, industrial decline and mass unemployment across Europe.
“We want to have the strongest and most mutually beneficial possible trade and investment relationship with China,” Olof Gill, the Commission’s spokesperson for trade policy, said on Thursday afternoon, in response to a Euronews question.
“But in order for that to happen, there are a number of concerns and real challenges that the European Union has consistently expressed to China that we need to see them meaningfully addressed before we can even talk about any future agreements or anything like that,” Gill added.
Brussels has for years complained about the harmful effects of Beijing’s state-run economic model, such as industrial overcapacity, extensive subsidies, market access restrictions, forced technology transfer and punishing export controls.
Europeans have grown exasperated by China’s refusal to make any substantial concessions, which has further exacerbated the negative trend. Still, the 27 member states have not yet agreed on a common line of action to push back.
“We’re focused on engaging with China in order to hear from them in a constructive (and) meaningful way how they propose to address the many challenges in our trade and investment relationship that we continuously flag,” Gill said.
‘Urgent response’
Merz unexpectedly floated his idea for a trade deal with China on Wednesday during a Q&A session at the Bundestag, the lower house of the German parliament. The suggestion was framed as a future possibility, rather than an immediate project.
“We have made significant progress in trade policy,” the German chancellor said, referring to the deals recently struck by the EU with Mercosur, India and Australia, all of which his government supported with enthusiasm.
“I can envision further agreements, for example, in the longer term, an agreement with the People’s Republic of China. We now need strategic partnerships worldwide to strengthen ourselves, especially in exports.”
Merz’s remarks stand in contrast with the tone he adopted in February when he visited Beijing and said the imbalance between Germany and China was “not healthy”.
Last year, Germany recorded a record-high trade deficit with China worth €89 billion. None of the 27 EU member states saw a surplus with the Asian giant.
By suddenly suggesting a trade deal, Merz seems to soften his stance, reflecting Germany’s reluctance to confront one of its main trading partners.
Commission President Ursula von der Leyen, by contrast, has embraced a hawkish policy and called on Western allies to close ranks against Beijing.
“We cannot and will not absorb China’s export-led growth model, and its industrial overcapacity,” von der Leyen said earlier this week while visiting Australia.
“Both the threat to our supply-chain security and the shock to our industrial base need urgent responses. These are responses we can only devise together.”
In a letter to von der Leyen, Belgian Prime Minister Bart De Wever urgeda tougher strategy to tackle the Chinese challenge, even if it means suffering retaliation.
“We have reached a point of no return where we must make difficult choices in the short term to protect our industry, economy and the well-being of our citizens in the long term,” De Wever said.
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