On Friday, 19 June, the European Council meeting ended with prudent progress on the issue of global macroeconomic imbalances, which had been on the agenda of the same summit on Thursday evening (see EUROPE 13891/2).
Without directly mentioning China, the heads of state or government indicated in their conclusions that the “European Council held a strategic debate on the issue of global macroeconomic imbalances” and “remains seized of the competitiveness agenda”.
Shared priorities. The leaders nevertheless agreed on two priorities: strengthening the European Union’s competitiveness and responding better to distortions in competition that affect the European market.
Beyond the policy of Beijing granting massive subsidies to its industries—which fuels Chinese industrial overcapacity and fosters its sale on the world’s markets—the monetary issue also cropped up in the discussions. The devaluation of Chinese currency (renminbi) was also identified as one of the causes of distortions in competition.
At the end of the meeting, German Chancellor Friedrich Merz stated that the EU27 had given European Commission two mandates in order to address these challenges: defend the EU’s interests in the context of constructive dialogue with its trading partners and strengthen the existing trade defence instruments, supplementing them with new instruments if necessary.
Diversification instrument. Speaking to the press, President of the European Commission Ursula von der Leyen confirmed this approach: “Europe has already built an extensive toolbox [...]; now we must use it more proactively and more strategically [...]. And, indeed, [...] the European Commission will work on new tools, such as a diversification instrument. [W]e saw clear support for a European response based on unity among the Member States and dialogue with China, which remains crucial.”
The president gave no further details on this new instrument. It could be a fairly broad tool that aims to help companies reduce their dependencies in certain strategic sectors, whereas the current trade defence instruments are considered to be too sector-specific. An instrument dedicated to overcapacity was also mentioned. In Brussels, some officials think the ‘de-risking’ (‘risk reduction’) strategy promoted by the European Commission is progressing too slowly.
Maintaining dialogue. Before presenting any new tools, the European Commission will first have to review those at its disposal. During the summit, a consensus in favour of using the instruments that already exist emerged among the leaders.
The Europeans also insisted on the need to maintain a space for discussion with Beijing. Spain is notably pushing for a stronger dialogue platform to be established with China, under the auspices of the European Commission, so as to avoid any confrontations and protect the supply chains in which the EU has a strategic interest.
The European Commission will continue its work over the summer and is expected to present initial courses of action in the coming months, possibly during the State of the Union address in September. The subject will also reappear on the leaders’ agenda during the European Council meeting in October.
Link to the conclusions: https://aeur.eu/f/mgw (Original version in French by Juliette Verdes with the editorial staff)