EU plans new ‘diversification’ rules to cut dependence on China

EU trade officials are drafting new rules to require companies in critical sectors to increase their number of suppliers in order to reduce reliance on China, the EU Commission’s top trade official told MEPs on Wednesday (2 September). Ditte Juul Jorgensen, director-general for trade and economic security, confirmed that the commission was drafting a “diversification instrument”, the latest in a series of trade defence measures drawn up by the commission in recent months aimed at curbing Chinese dominance. The commission has also drawn up plans to curb the oversupply of Chinese industrial goods, as well as a proposed Industrial Accelerator Act, which would bar some Chinese products from public procurement contracts and limit takeovers of European companies. Denis Redonnet, the bloc’s former top trade enforcement officer, has been holding talks with counterparts in Beijing this week as part of his new brief leading the EU’s negotiating team on China, and Juul Jørgensen told MEPs that she plans to follow Redonnet to Beijing later this month. Jørgensen, who replaced Germany’s Sabine Weyand as the bloc’s trade director in June, told MEPs that “we see an engaged China in these talks, but of course the challenges are very, very significant,” during a hearing with the European Parliament’s international trade committee. “What we see in relation to China is … increasing concentration dependencies, including in strategic sectors – that is a risk to the EU,” Jorgensen said. “We see that as a result of a number of Chinese domestic policies, but of course also of China’s competitiveness in a number of these sectors, we have an increasing trade deficit,” she added, describing it as an “untenable situation”. The EU’s goods trade deficit with China continues to rise quickly.