The discussion gained new momentum last week during a closed-door meeting of the European Commission on the relationship with China. That meeting served as preparation for the upcoming trade conference of the G7 economic powers. The central question was how Europe should handle the increasing pressure on various industrial sectors.
Concerns focus, among other things, on electric vehicles, batteries, solar panels, steel, and chemicals. European policymakers fear that these Chinese products are capturing an increasingly larger share of the European market in these sectors.
More Broadly Applicable
A key point of concern is what Brussels considers persistent Chinese overcapacity. European officials state that large production volumes, combined with government support, are putting pressure on the competitive position of European companies.
Promotion
Therefore, new trade instruments are being developed to better protect the European market. Measures are being considered that are more broadly applicable than existing anti-dumping or anti-subsidy rules.
Security
At the same time, the European Union is trying to strike a balance between protecting its own industry and avoiding an overt trade conflict with Beijing. Chinese media and policymakers warn that European trade barriers could be harmful to companies and consumers and describe them as protectionist measures.
The discussion on economic security is also playing an increasingly larger role. Trade policy in Brussels is more frequently linked to questions about strategic dependencies and the protection of its own crucial sectors.
OECD
A new study by the OECD reinforces European concerns about the competitive position of Chinese companies. According to the OECD, Chinese enterprises have received about three to eight times more state aid over the past twenty years than comparable companies in OECD countries. The support consisted of direct subsidies, tax benefits, and cheap loans.
The OECD estimates that nearly 60 percent of the growth in the global market share of Chinese companies is related to this government support. The study also points out that state-owned enterprises and companies with strong government ties were often the largest recipients of support.