Berlin and Paris propose trade tool to curb China's EU market access
The plan follows China's warning that it would retaliate against EU trade measures
Published
Germany and France are floating a new trade instrument designed to limit China's access to the European Union's market, according to the proposal under discussion between the two governments. The move builds on Germany's push for a tougher China policy, which has gathered pace alongside complaints from Volkswagen over subsidies given to Chinese carmakers.
The proposal comes after China warned on September 29 that it would respond to any EU trade action, a signal that Beijing favours a negotiated settlement over an open dispute. A reciprocity-style tool aimed at Chinese market access raises the chance that Beijing instead retaliates against European exporters.
The EU is not alone in weighing new barriers. Britain's business minister, Jonathan Reynolds, is drawing up a tariff package targeting Chinese electric vehicles over concerns about state subsidies, the Times reported.
The timing adds to pressure already building in European markets. France's 10-year bond yield touched 4.989% on Friday, its highest since 2002, and the premium investors demand to hold French debt over German debt widened to 150 basis points, a level last seen in 2012, before the French-German spread eased to 140 basis points by the end of the week. With French fiscal strain running alongside weak eurozone growth signals, the bloc has less room to absorb a trade confrontation with China without adding further pressure on European equities.