(May 29): The European Union cautioned that its economic relationship with China must change as the bloc begins considering tougher measures to counteract growing imbalances.
The European Commission, which handles trade matters for the EU, held preliminary meetings Friday to discuss how to address rising economic competition from China, including a flood of products that have undercut numerous European industries. Beijing is also gradually shunning foreign products within its own market.
“China is a critical partner, and engagement and dialogue will continue,” the commission said in a statement, following a meeting of EU commissioners. “At the same time the current state of the trade and investment relationship is not sustainable.”
The deliberations reflect the EU’s desire to rethink its economic relationship with China — but also the difficult spot the bloc is in. Any action the EU takes to protect local firms could also provoke retaliation that damages Europe, given many countries still rely on exports to China.
“As economic and security interests become ever more intertwined, both dimensions will require a more robust and coherent response,” the commission said, adding that there would be further discussions on the matter in June at both the summit of Group of Seven countries and at an EU leaders’ meeting.
The issue has split the EU.
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German Economy Minister Katherina Reiche this week cautioned that any EU measures against China must not hamper European sales to the country.
Others are calling for stronger action. A paper circulated last weekend backed by France, Italy, the Netherlands, Spain and Lithuania proposed the EU adopt a new, cross-sector trade defence tool.
Ahead of Friday’s meeting, China warned the EU that any fresh curbs on its exports would result in countermeasures.
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