Germany and France push EU tool that could cut China off from single market
Chancellor Friedrich Merz and President Emmanuel Macron have asked Brussels to fast-track a new trade instrument, Bruegel reports
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Germany and France are finalising a joint push for a European Union trade tool that could block Chinese companies from the bloc's single market, according to Rhodium Group analyst Noah Barkin writing on his Substack newsletter. He says the two governments want the European Commission to fast-track the instrument, possibly by reworking the existing Anti-Coercion Instrument so it can be triggered by a negative rather than a positive qualified majority among member states.
A letter from Chancellor Friedrich Merz and President Emmanuel Macron to Commission President Ursula von der Leyen argues the EU's current trade-defence toolbox is no longer fit for purpose, according to a Bruegel analysis. The letter calls for a tool similar to the US Section 301 statute, able to restrict or cut off market access where a trading partner causes what it calls severe and systematic trade distortions, and asks that it be activated through comitology unless a qualified majority of member states object, according to Euronews. Bloomberg reports the tool could affect Chinese firms' access to an $8 trillion market of traded goods and services.
China's Commerce Ministry has warned it will respond firmly if the EU imposes restrictions on Chinese businesses or products, saying such a step would undermine mutual trust and disrupt trade talks, according to CNBC. A ministry spokesperson separately called the plan a protectionist and unilateral measure that would backfire on the EU and destabilise global supply chains, according to Global Times. EU leaders are due to discuss the issue at the European Council meeting on October 15 and 16, after Trade Commissioner Maroš Šefčovič briefs ambassadors on his recent visit to Beijing, according to EU Insider.
The push revives a confrontation over market access that had appeared to ease earlier this month, when Šefčovič described negotiated gains on rare earths, car parts and olive oil rather than new restrictions. It also goes further than the auto-specific quotas and caps Germany had been pushing just a day earlier. The timing is awkward: it lands as the eurozone is already dealing with budget disputes among member states and a Commission warning on energy affordability, leaving less room to absorb a renewed standoff with Beijing without it spilling into growth expectations.