Converted
Four years after Germany’s Zeitenwende on foreign and defence policy, Berlin has made another “turning point” on trade, with a call to raise barriers against China. Many of its EU allies think it’s not a moment too soon, writes Andy Bounds.
Context: Germany’s manufacturers were until recently as reliant on China’s consumers as they were on cheap Russian gas. Germany has long opposed tougher action against Beijing, even as its trade deficit has ballooned.
But yesterday Chancellor Friedrich Merz demanded strong action to save Europe from Chinese exports. In a letter to European Commission president Ursula von der Leyen with French President Emmanuel Macron, Merz called for tougher trade measures and a new instrument to quickly close the EU market to countries that do not play by the rules.
No country was mentioned but with trade commissioner Maroš Šefčovič off to Beijing on Thursday the target was clear. Šefčovič has called the EU’s roughly €1bn a day trade deficit with China “unsustainable” and a threat to the European social model.
The two leaders say that “a massive industrial shock is affecting sectors at the heart of the European industrial model and of systemic relevance”, referring to pharmaceuticals, aerospace, automotive, machine tools and chemicals industries.
It comes just two years after Germany declined to back the imposition of anti-subsidy duties on Chinese electric vehicles — a fact remarked upon by member states who have been calling for tougher action against Beijing for years.
“Germany is pragmatic,” said one EU diplomat. “As long as China was buying its cars and machinery it didn’t want to pick a fight. Now it is damaging the economy, that has changed.”
“Germany has long been the most reluctant EU member state, but Berlin finally seems to have seen the light,” said a second.
Officially Berlin still tries to comply with WTO rules and refrains from naming China as the main culprit. The problem, German officials say, is “unfair practices” and “distorted competition”.
A German official acknowledged that the combination of falling German exports to China and surging Chinese imports had triggered a shift.
“Industry has moved and political parties especially, the [ruling centre-right] CDU as well,” they said.