Brussels will press Beijing to reduce barriers to European exports at a high-level meeting in September after the EU’s trade deficit with China hit almost €400bn last year.
EU trade commissioner Valdis Dombrovskis told the Financial Times that the “staggering” deficit, which has doubled in two years, underscored the need for Beijing to open its markets.
“The China-EU trading relationship is very unbalanced. China is running a huge trade surplus,” Dombrovskis said in an interview. “And the level of openness from the Chinese side is not the same as the level of openness from the EU side.”
His stance echoes that taken by consecutive US administrations. US trade representative Katherine Tai has said China must correct the “unbalanced” relationship, which is “unhealthy” and “damaging” to the American economy.
The US has used tariffs and export bans to try to change Beijing’s approach with limited success. In 2022, its imports of goods and services from China hit a record high.
Dombrovskis emphasised that he wanted to maintain good relations with the world’s second-largest economy and he expected Beijing to raise its own concerns in sessions of the EU-China High-Level Economic and Trade Dialogue in September.
In 2022 goods exports from the EU to China were little changed at €230bn, while imports increased to €626bn, more than a fifth of the bloc’s total.
Dombrovskis said the dialogue, normally between him and a Chinese vice-premier, would “provide the opportunity to discuss these issues and to find solutions”.
The Latvian also hinted that if the issues were not resolved the EU could deploy a range of new trade weapons it has given itself in recent years — and that Brussels could even take action without a formal complaint from businesses.
The European Commission last brought a so-called “ex-officio” case more than a decade ago, officials said. “We stand ready to use this toolkit should there be complaints from the industry or if necessary, on an ex-officio basis,” Dombrovskis said.
The EU’s tools include an anti-coercion instrument that allows retaliation against trade measures intended to force a change in foreign policy such as boycotts; the ability to block investment in the EU by subsidised companies; and the closure of government procurement markets to countries that do not open them to EU businesses.
Dombrovskis stressed the bloc was discussing “de-risking” not “decoupling”, given China’s dominance of green technology. “We need to find ways to co-operate with China while addressing risks and possible strategic dependencies,” he said.
He criticised Beijing’s announcement this month of export restrictions on gallium and germanium, metals used in chips, electric vehicles and a range of telecoms products. “We are now doing the detailed analysis of the provisions and their potential impact on supply chains and EU industries, and indeed there are concerns as these export restrictions go beyond what is needed to protect the essential security interests,” he said.
The commissioner said China should only impose export controls where they were “based on relevant security considerations” and complied with World Trade Organization rules.
The EU is discussing introducing its own approach to export controls, which Dombrovskis said would be narrowly focused on national security grounds.
He called on China to help breathe new life into the international trading system.
“China has benefited enormously from its WTO membership, but many of China’s practices are actually distorting that level playing field,” he said. “It’s important that China is co-operating on WTO reform because it’s one of the biggest beneficiaries of WTO, and it should also be in China’s interests that the system continues to function.”