 has recently escalated its economic stance against China. A notable move was increasing tariffs on Chinese EVs.){kind=link}
The European Union (EU) has recently escalated its economic stance against China. A notable move was increasing tariffs on Chinese electric vehicles (EVs). It has sparked discussions about a cooperative “de-risking” strategy with the United States. This strategy aims to protect the EU’s economy and enhance competitiveness. By forming stronger partnerships to reduce vulnerabilities.
What Is “De-Risking”?
The term “de-risking” was introduced by European Commission President Ursula von der Leyen. It reflects the EU’s goal of reducing economic threats, such as dependency on China for critical materials. The Biden administration and the G7 have adopted similar language, making de-risking a central part of their economic policies.
While the EU does not use the U.S. framework of “protect, promote, and partner,” its strategy aligns with these goals. EU’s approach to China is more cautious and measured than that of the U.S.
Protecting the EU from China’s Influence
The EU has grown more assertive in its dealings with China, particularly because of concerns over China’s support for Russia, its human rights violations, and its influence on global trade. A significant worry for the EU is China’s overproduction in industries like steel, which can flood global markets, and Europe’s dependency on China for essential materials.
To counter this, the EU has taken steps to shield its economy. One major action is the imposition of provisional tariffs on Chinese electric vehicles. It has also strengthened regulations on foreign subsidies and improved investment screening processes.
Promoting European Competitiveness
To stay competitive, the EU is investing heavily in its own industries. It has introduced two key acts: the Net-Zero Industry Act and the European Chips Act. These are designed to promote European production of green technologies and semiconductors, which are essential for the future of many industries.
The EU also sets global standards through regulations like the General Data Protection Regulation (GDPR), a law that governs how companies collect and use personal data. This regulatory power gives the EU leverage on the world stage, allowing it to influence international business practices.
Building Stronger Partnerships
In order to successfully implement its de-risking policy, the EU understands how important collaboration is. It has strengthened cooperation with the G7. EU also launched a Trade and Technology Council with India, and invested in global infrastructure projects.
The EU is pursuing trade deals with countries outside of China. The ongoing negotiations with the Mercosur trade bloc in South America are one such example. These deals aim to diversify EU trade partnerships and reduce dependency on any single country.
Challenges Facing the EU’s Strategy
Despite these efforts, the EU faces several challenges. While it leads globally in areas like mechanical engineering and advanced manufacturing, its productivity growth is slow, and investment in key sectors lags behind China and the U.S. Energy costs in Europe are high, and the EU remains heavily reliant on China for raw materials and pharmaceuticals.
The EU’s innovation clusters are strong, but scaling up cutting-edge research has proven difficult. In fields like artificial intelligence (AI), the EU trails the U.S. and China in both investment and development.
Can the U.S. and EU Work Together?
Collaboration between the U.S. and EU could strengthen both of their de-risking strategies. The differences in their approaches to China, as well as competitive tensions, may complicate this. The outcome of the 2024 U.S. presidential election could also impact the future of U.S.-EU relations. Along with their joint efforts in addressing China’s influence. The EU’s de-risking strategy shows promise but requires stronger action. By boosting competitiveness and reducing dependency on China.