On Tuesday, European Union investigators raided the Dutch and Polish offices of security scanner maker Nuctech in a case based on one of Europe’s longest-running grievances against China, wasteful state subsidies that help Chinese companies undercut European competitors, Politico reports. .
Nuctech was once headed by Hu Haifeng, the son of President Xi Jinping’s predecessor, Hu Jintao, so it was predictable that China’s reaction would be fierce.
The raid highlights the further deterioration of the business environment in the European Union and sends an extremely negative signal to all foreign companies
– fumed China’s EU representation.
According to the newspaper, the timing of the raid is also significant because the Chinese head of state is coming to Europe in May – he is visiting France, Serbia and Hungary for the first time in five years – which could bring about a permanent change in the way Europe deals with trade problems with China.
The European Commission deploys its big guns
So far, Brussels has avoided a direct confrontation with Beijing and instead of a trade war, it has tried to hold a dialogue about state subsidies, overcapacity in the fields of steel, aluminum and green technologies. So far, it seems, to no avail. However, there is now a growing political consensus that Europe must protect essential technologies. In fact, the topic has been on the table since last October, when the European Union launched an investigation into the issue of state subsidies for electric vehicles. Brussels has now continued its fight to “rebalance the partnership between the European Union and China” by investigating wind turbines and hospital equipment.
We like fair competition. However, we do not want China to flood the market with massively subsidized electric cars. This is what we are fighting against. Competition yes, dumping no. That should be our motto
Ursula von der Leyen, President of the European Commission, said on Wednesday.
One of the tools of the European Commission’s fight against China is the International Public Procurement Instrument (IPI), which aims to take action against China if it were to displace European companies from public procurement tenders. It was used for the first time this week in the medical technology case.
According to Gunnar Wiegand, the former senior diplomat for Asia at the European External Action Service and a prominent fellow at the American German Marshall Fund, the new commercial weapons are designed for deployment, not just for show.
It should not surprise anyone that the tools created in the long process of the past years are now actually being used
– He told.
Even our favorite online marketplaces may be affected by the action
Europe’s tougher approach has both advantages and dangers, as it must prepare for Beijing’s counterattack and a turbulent period of trade conflicts. The United States is definitely following the EU’s new rules of the game closely. Immediately after this week’s announcement of the medical device investigation, U.S. Trade Representative Katherine Tai said she was following the developments with “interest” and that they would work together to identify non-market policies and practices.
The European Union is also taking action against China’s massive infrastructure investment projects, in the framework of which Beijing is expanding by building ports and roads connecting Asia with European markets.
According to an internal committee document obtained by Politico, the union must now focus more seriously on gaining a foothold in key strategic mining and energy interests in Africa and Central Asia.
In the clothing sector, Brussels is also preparing to deal with the market impact caused by the Chinese app Shein. Brussels could classify Shein as a giant platform in the coming days, exposing it to extra scrutiny under the European Union’s content moderation law, according to two people familiar with the upcoming decision.
China always has an answer
The question now is when and how Beijing will retaliate, following what it has done so far. Because every time Europe raises the stakes on trade, China has an answer: it usually plays the bloc’s countries against each other – for example, by threatening to favor Boeing planes over Airbus, or not to buy French and Spanish wines.
It was exactly this tactic that China forced the EU trade commissioner at the time, Karel De Gucht, to back down from his 2013 offensive against Beijing’s telecommunications and solar energy industries.
Recently, China played the rare earth card and moved to block shipments of gallium and germanium, two materials used in chip manufacturing, after the United States pressured the Netherlands to block some sales of local ASML advanced chip manufacturing equipment to China.
When asked about the EU’s increasing deployment of trade weapons, Anders Ahnlid, head of the Swedish National Trade Council, said that “the Commission must do everything possible to avoid a full-blown trade war with China.”
China Shortly after von der Leyen launched her high-profile investigation into Chinese-made electric vehicles, Beijing attacked European spirits exports in a move aimed particularly at France’s cognac sector. Paris has been a major supporter of the electric vehicle cause. But despite threats of retaliation, von der Leyen has little room to keep her gunpowder dry as she battles to win a second term as Commission president — which would require the support of France, a leading advocate of protecting European industry against China.
In the past, we made the mistake of becoming dependent on Russian oil and gas. We must not repeat this mistake with China depending on its money, raw materials and technology
– said NATO Secretary General Jens Stoltenberg on Thursday in Berlin.
