MNI INTERVIEW: EU Should Use Safeguards Against China Imports

China would find it difficult to object if the European Union used its “safeguard” rules, which have already been deployed for the steel industry, as a way of protecting its industrial base from the surge in Chinese imports, a former senior European Commission trade official told MNI.

Safeguards, which do not target any country in particular, are WTO compliant and faster to implement than anti-dumping actions such as a proposed “overcapacity instrument”, as well as being suitable for use to protect a broader range of EU products, Bruegel think tank senior fellow and former Commission director for trade strategy Ignacio Garcia Bercero said in an interview.

"At least in the short term - the next three to four years - those measures can be adopted on the basis of the rules of the WTO without risking retaliation from third countries," he said.

Any adoption of new trade tools would likely take a long time for the EU to agree and would also risk a "significant escalation of trade conflict with China" if they went against the bloc's international obligations.

DIFFICULT TO OBJECT

"It would be very difficult for China to object" to safeguarding action, he said "This is a perfectly legitimate instrument at the WTO.”

While debate continues on the possible use of safeguards, the European Commission also proposed the overcapacity instrument at a May 29 orientation debate. The EU is already moving towards taking other action against China, by pushing forwards its Industrial Accelerator Act, which will impose “Made in EU” requirements on official procurement and force foreign investors to share technology, prompting threats of retaliation from Beijing. (See MNI: EU Nears China Trade Action Despite Reprisal Threats)

Safeguarding action applies quotas based on the average exports of trading partners in previous years. 

While the instrument cannot de jure focus solely on Chinese imports, "it can be fundamentally targeted on those suppliers whose imports have been particularly disruptive because they have been increasing rapidly in the last few years,” Garcia Bercero said.

"It would only cut the market share of the country that has been increasing its exports very rapidly," he said, while the impact on other exporters would be "relatively minor.”

GERMANY KEY

One big obstacle to safeguarding action is the requirement for a qualified majority vote covering 55% of EU states and 65% of population in support, and winning such a majority would be "difficult" without German agreement, he noted. 

A recent trade policy paper urging more assertive EU use of safeguards as well as a new more strategic economic security instrument to protect multiple industrial sectors was signed by France, Spain, Italy, The Netherlands and Lithuania, but not by Germany, while Spain later withdrew its support. 

"My impression is that Germany would be reluctant for action that is in breach of international rules and those of the WTO,” Garcia Bercero said, though he noted that the growing threat posed by China to strategic German sectors such as chemicals could persuade the country's industries to become more supportive of action. 

EU leaders are due to discuss trade policy responses to the surge in Chinese imports at their June 18 summit while EU Trade Commissioner Maros Sefcovic is due to meet with his China counterparts before the end of this month.