He called it “shock bent”, which consists in a strong increase in exports from China not only to Europe, but also to third markets where China competes with Europe, sometimes even more clearly in the European Union.
Forecasts point to this the EU’s trade deficit with China could reach 400,000 million euros by 2025, more than double the pre-pandemic level.
I must bear in mind that the Eurozone continues to run a trade surplus with the rest of the world, making the imbalance with China particularly worrying.
The growth in our trade position with China is offset by the removal of the global leadership period caused by the pandemic after the energy crisis involves Russia’s invasion of Ukraine.
These shocks triggered a strong rise in producer prices in Europe, while China entered a prolonged deflationary phase, resulting from disruptive manufacturing activity that created the overcapacity we see today.
If Europe does not adapt its equipment to respond to the magnitude of the lower shock, this will result in continued deindustrialization.
This coastal divergence between European producers and chinos has given chino exporters a decisive price headwind in many sectors, including machinery, chemical products, electric vehicles and renewable resources.
The theoretical adjustment mechanism that was supposed to alleviate this deficit – the appreciation of the renminbi against the euro – did not take place. In exchange, the renminbi has recently weakened against the euro.
The result is exactly what economic theory would predict: a loss of the European market price in the Chinese market, third country markets and even more so in its own market.
The EU’s trade defense tools, such as anti-dumping and anti-subsidy measures, are useful, but they do not have the strength needed to tackle the severity of the problem. These tools are slow to activate and require a lot of input from the bias estimation commission and are specific to each company and product.
Let us try to investigate each case one by one Chinese exports continue to flood markets, This is not a viable strategy for European industry.
One of the most well-known things that we care about most is the requirement that the consumption be of national or marine origin, to have a minimum local content. The reality is that this measure will further increase production costs for European producers and could disrupt the agendas of international governments, ultimately reducing Europe’s competitiveness internationally.
On the other hand, the most promising issue would be to monitor and respond to significant competitive differences arising from the high inflation differential and, to a lesser extent, the weakness of the yuan against the euro.
This would allow the European Commission to monitor the development of sectoral prices, create transparent shadows of concerns and start structured consultations with China on the loss of external European competitiveness.
This mechanism would be more automatic and would undermine the entire economy compared to the current fragmented focus in time to continue. oriented enough to avoid indiscriminate protectionism.
Critics may report possible tensions with the World Trade Organization, but the EU has shown that it can be introduced with a decision if relevant interests are at stake, as it shows a carbon adjustment mechanism (or interprets the importation of certain products with high carbon emissions).
Expecting Beijing to resolve the situation voluntarily is not a realistic plan. If Europe does not adjust its equipment to respond to the magnitude of the lower shock, this will result in continued deindustrialization, accelerated labor losses in strategic sectors, and a dangerous erosion of the manufacturing base necessary for technological superiority and economic resilience.
It is not a question of protectionism, but rather of proportionality and realism in front of a structural network for which the existing norms are not designed. However, the EU cannot be limited by slow procedures The industry is constantly being eroded.
It is essential to have a more robust and complete set of commercial defense hardware. It is clear that these drugs can only help you in Europe by using the time you have bought with them to improve your competitiveness and productivity.
*** Alicia García Herrero is Lead Economist for Asia Pacific at Natixis CIB and Principal Investigator at Bruegel.
Leave a Reply