The European Union is holding key discussions on Friday over whether to impose tariffs or other measures against Chinese imports. While symbolic action is likely, that action will likely be delayed and largely watered down. Assuming that is the case, European industries will remain victim to China’s endemic dumping of state-subsidized goods into their markets.
The EU’s trade deficit with China is likely to exceed $400 billion this year, with an EU official telling reporters this week that China’s “existential” dumping threat meant 29 million EU-based jobs could be lost. Although the problem is particularly acute in terms of Chinese electric vehicle exports, it extends across numerous sectors. But the EU’s alarm is long overdue.
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China’s global exports are so cheap not because Chinese manufacturers are especially efficient or productive, but because Chinese manufacturing is very heavily subsidized by the government. But while China likes to export goods without any regard for foreign industries or governments, it adopts the exact opposite stance toward European businesses seeking entry into its markets. These businesses are forced to transfer intellectual property, ownership stakes, and governance authorities in return for doing business in China. They’re also forced to persuade their domestic governments to placate China on political concerns such as Taiwan, human rights, and engagement with the United States.
Xi Jinping’s cutthroat rationale is simple. He needs a constant and ever-increasing stream of exports to generate the jobs and economic growth to assure that the Chinese Communist Party’s grip on power holds firm, and to secure his destiny of CCP global dominance.
Asked about Friday’s meeting, a Chinese foreign ministry spokeswoman thus rolled out the standard CCP tropes. “China-EU trade relations are win-win in nature,” Mao Ning said, adding that, “The EU needs to put trade ties with China in perspective and honor its commitment to free trade. China will closely follow the EU’s moves and take all measures necessary to safeguard legitimate rights and interests.”
The notion that China is committed to free trade is like saying that Joe Biden’s presidency showed commitment to youthful vigor. But Beijing is clearly gambling that the EU will struggle to introduce any significant response to its activities.
That needn’t be the case. It’s not as if the EU doesn’t like to challenge trade partners now and again. The 27-member political union loves to fine (leach) American technology companies in order to raise hundreds of millions of dollars in revenue, for example. This activity is plainly unjust, afflicting American companies that are successful in Europe only because Europeans like them more than their European competitors. The EU bureaucrats cannot stand the fact that their regulatory obsession has meant European technology companies cannot compete. Regardless, facing China’s actual unfairness, the EU has long refused to respond.
The major issue is that the EU is, well, weak. Put simply, far too many EU executive leaders and individual leaders of EU member states have feared that China will lash out with its own tariffs in the event of their taking even minimal action against Chinese dumping. However, they fail to recognize that Xi cannot afford a drawn-out trade war with Europe. His economy is stuttering with stagnating wages, sustained rural poverty, household wealth that has evaporated with the burst of China’s property bubble, and mass youth unemployment. He needs export access to the European marketplace and will, if sufficiently pressured, compromise to retain access.
Another issue is that the EU is far less unified than its fanatical federalist superstate supporters pretend it to be. Germany and Spain have ignored the supposedly sacred principle of EU unity, their alliances with the U.S., and even European security to maintain privileged trading status with China. While Spain revels in condemning the U.S. and Israel, for example, it has absolutely no problem with China’s genocide against the Uyghur people. The Spanish government is now opposing even the idea of tougher EU action. And let’s not forget how former Hungarian prime minister Viktor Orban took this appeasement to another level, transitioning into a political prostitute for Beijing.
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Perhaps the EU will surprise everyone and finally take a stand for the interests of its people.
Doing so wouldn’t just make economic sense, it would help blunt the rise of populist political movements born of frustration with lethargic governments and weak economies. But first, EU leaders will have to find the two things they have lacked most. Courage and unity.
