Brussels should resist the siren song of protectionism

The European Union worries about its trade deficit with China. But the remedy Brussels is reaching for risks making the problem worse. Maros Sefcovic, the European Commission's trade chief, plans a video call with Chinese officials this month and a visit to Beijing in October.

He warned on Wednesday that the EU will impose "harsher measures" on China if trade talks do not produce "very concrete results", indicating the EU should restrain China's exports. That is a curious starting point for a trade negotiation. If Europe wants to narrow its deficit, it should first ask why its companies are exporting less — and what can be done to make them more competitive.

China's manufacturing competitiveness reflects years of investment in research and development, fierce domestic competition, enormous economies of scale and the depth of an industrial ecosystem that allows companies to move rapidly from design to mass production.

Europe has formidable strengths of its own. Its problem is that too many of its industries are losing ground in precisely the technologies and manufacturing capabilities that will determine future growth.

Trade barriers will not repair that weakness. Instead, they will raise costs for European consumers and manufacturers that depend on Chinese inputs. With eurozone inflation already at 2.9 percent in July, above the European Central Bank's 2 percent target, restricting a source of relatively competitive goods is hardly cost-free. Protectionism can protect a producer while imposing a tax on everyone else.

The EU's proposed carrot-and-stick approach — encouraging talks while threatening tougher measures — will not help address the EU's concerns. China today is a large technological and industrial economy with a huge domestic market and extensive trading relationships. Beijing will not accept a bargain in which dialogue is the carrot and coercion the stick.

There is an even more important reason for Brussels to be cautious: it should not outsource its China policy to Washington.

The recent G20 meeting of finance ministers and central bank governors in Asheville, North Carolina, offered a warning. Washington sought to rally partners around concerns about China's trade surplus and industrial "overcapacity", but the meeting ended without a communique amid disagreements.

Europe knows this game well. The US has repeatedly portrayed the EU's trade surplus as justification for tariffs, forcing European governments to defend themselves against measures they regard as arbitrary. It would be self-defeating for Brussels to reject that logic when applied to Europe, only to reproduce it against China.

France's so-called new anti-ultra-fast-fashion law illustrates the danger. The measure, taking effect this month, imposes escalating charges on low-cost fashion sold through platforms such as Shein, Temu and AliExpress, while many established European and traditional fast-fashion retailers face no equivalent burden. If environmental standards are the objective, they should be applied consistently rather than calibrated in ways that appear designed to hit particular foreign competitors. Such double standards invite precisely the World Trade Organization concerns that China has raised.

The better route is to make trade more dynamically balanced by expanding Europe's capacity to sell, not simply restricting what it buys. That means reconsidering export controls on high-technology products, including machinery and equipment that European companies are capable of selling competitively in China; widening market access for European agricultural, automotive, pharmaceutical and medical-device producers; and tackling the regulatory and investment barriers that suppress European productivity.

The trade and investment consultations mechanism established by China and the EU in June provides a mechanism for doing this. Brussels should use it to negotiate seriously over market access, subsidies, standards, industrial policy and the obstacles facing European exporters.

Europe does not have to choose between Washington and Beijing. Nor should it imitate Washington in the hope of gaining leverage over Beijing. Its interest is simpler: a competitive European economy, open markets where they serve European interests, and trade rules applied consistently to all trading partners alike.

The EU's trade deficit against China is a result of the EU's high-tech export restrictions and the law of the market. It didn't emerge overnight, and cannot be addressed by suppressing Chinese companies.

The EU once recognized that protectionism was a threat to prosperity. It should not veneer it with virtue merely because Washington has rediscovered its swagger.