European Union should get over its protectionist impulse

The upcoming European Council summit in Brussels from June 18 to 19 is a pivotal opportunity for the European Union to review its trade and investment policy toward China.

The EU needs to decide whether it wants to be more protectionist and confrontational or foster a more cooperative relationship with the world's second-largest economy.

The EU has been crafting multiple trade and investment measures against China, including the proposed Industrial Accelerator Act. The legislation would exclude China from participating in public procurement bids in certain sectors and from accessing subsidies in supply chains.

Since March 2019, when the EU redefined China from a comprehensive strategic partner to a "cooperative partner, economic competitor and systemic rival", the bloc has adopted a less cooperative policy. Many of the EU's investment screening and trade measures in the past years have deliberately targeted China even if they did not explicitly mention it by name.

The EU has also kowtowed to coercion by the United States to ban Huawei 5G and is now planning more measures against the Chinese company.

Within the 27-member EU, countries are divided on their approach to China. France, Spain, the Netherlands, Italy and Lithuania have advocated a tougher China policy while Germany and some Scandinavian countries believe stronger ties with China serve their best interests.

EU has leveled various accusations against China, including running a trade surplus with the bloc, State subsidies, overcapacity and unfair trade practices. Yet, it's worth noting that the EU as a whole runs trade surpluses with most countries, including the US.

When Washington imposed punitive tariffs on the EU, the bloc tried hard to convince US President Donald Trump that trade deficits are not problematic. Yet somehow China's trade surplus has become a concern.

Many Europeans find it difficult to accept the fact that the country that once exported only labor intensive goods, such as garments, footwear and toys, is now globally competitive in electric vehicles, batteries, solar panels, wind turbines, AI and several high-tech sectors.

Most Europeans are not aware of China's phenomenal transformation.

I am writing this column in Chongqing, which has changed dramatically in the past two decades from a Third World city into a modern urban center comparable to major European cities.

At the same time, the EU's competitiveness has declined, especially against the US and China. According to a September 2024 report by former European Central Bank president Mario Draghi, the numerous challenges the EU faces are mostly internal.

China's GDP in nominal terms was smaller than that of Italy in 2000. But it surpassed Germany's GDP in 2007, and by 2025, was almost the same as that of the entire EU.

Blaming China for its own problems is a misguided approach. Instead, the EU should focus on addressing its internal problems and policy failures. During my time in Brussels, the EU prided itself on being a regulatory giant even though it had no tech giants of its own.

The Draghi report highlights that overregulation by the bloc has become a major problem that discourages innovation.

The EU's Cold War mentality, as exemplified by the demonization of Huawei and Chinese EVs as national security threats, is another problem.

In contrast, China welcomes EU investment, with millions of German, French and Italian cars running on Chinese streets.

Many EU companies have been involved in China's critical infrastructure construction. China has never branded Airbus as a national security threat despite the fact that it has a dominant 55 percent share in the commercial aviation market in the Chinese mainland.

The Comprehensive Agreement on Investment, which took many years to negotiate and remains frozen by the European Parliament, is a huge wasted opportunity for European companies in the Chinese market.

As two major trade partners, China and the EU have frictions on many issues. However, the right way to address them is through consultation rather than unilateral protectionist measures.

A tit-for-tat trade war between China and the EU will be a lose-lose game for both and the fragile global economy.

When EU leaders meet next week, they should aim to preserve the mutually beneficial trade and investment relationship, not derail it with tariffs, sanctions and discriminatory tools.

The author is a China Daily columnist.

chenweihua@chinadaily.com.cn