Europe is facing challenges from a surge in cheap Chinese imports, leading to concerns over de-industrialization and a price war. The European Council on Foreign Relations (ECFR) notes that European nations are hesitant to take necessary actions against these threats due to fears of retaliation and coercion from Beijing. Despite the need for measures like import tariffs and supply chain diversification standards, European capitals, including Berlin, have failed to implement a comprehensive policy package to address the imbalance with China.
The ECFR article highlights that the European competitiveness debate is primarily focused on minor solutions, with Chinese coercive threats hindering more robust policymaking. German chancellor Friedrich Merz and Italian Prime Minister Giorgia Meloni have emphasized deregulation and cutting red tape in response to the situation. However, European multinationals have cautioned about potential trade conflicts and retaliation if Europe implements legitimate trade defenses.
While disagreements among European capitals contribute to the lack of a unified response, Beijing’s coercive tactics play a significant role in the inaction. China has intensified its economic coercion against Europe, as evidenced by recent actions such as instructing Chinese companies to defy EU investigations and sanctions. Additionally, China has issued threats related to EU proposals on industrial and cybersecurity legislation, impacting European defense contractors and raising concerns over supply chain security.
The article underscores that China’s competitive advantage stems from state capitalism practices, including an undervalued renminbi and substantial industrial subsidies. This advantage fuels a domestic price war, prompting Chinese manufacturers to rely on exports for survival. The ECFR emphasizes the need for Europe to adopt a comprehensive agenda that combines industrial protection and economic deterrence to effectively address the challenges posed by China. Failure to do so could leave Europe vulnerable to Chinese economic pressures.
