UK should be wary of the EU's offer lest it prove to be a poisoned chalice: China Daily editorial

The United Kingdom spent years extricating itself from the European Union's trade policy. Now Brussels appears to be offering it an unusual bargain: access to the European market in exchange for adopting European restrictions on China. The irony is obvious. So are the economics.

France and Germany have reportedly proposed exempting British automakers from the EU's forthcoming "Made in Europe" requirements, provided the UK aligns its trade "defenses", including tariffs on Chinese electric vehicles, with those of the bloc.

For UK Prime Minister Andy Burnham's government, anxious to repair relations with Brussels, the deal may look tempting. However, this could result in the UK exchanging its independent trade policy for the normal access to the EU market that it ought to be entitled to in the first place.

UK and European carmakers operate through deeply integrated production networks. Components cross the English Channel repeatedly before vehicles reach consumers. Excluding the UK from European industrial preferences would damage continental manufacturers as well as British ones. Brussels is therefore proposing to exchange relief from a problem of its own making for British participation in another.

And there is no guarantee that the benefits for the UK would outweigh the costs. Exemption from the EU's local-content rules would protect UK manufacturers from discrimination in an important export market. Yet imposing unilateral tariffs on Chinese EVs would create additional costs: higher prices for UK consumers, reduced competition, potential disruption to investment and the risk of Chinese retaliation against UK exporters.

If the UK accedes to the EU's EV-related demands this time, will it then face fresh coercion from Brussels when the EU targets other Chinese industries and the UK does not follow suit? This concern is not without foundation, as the EU is reportedly drawing up trade restrictions on China sector by sector.

The timing of the EU's proposal makes the bargain still more questionable. Brussels began pressing London in September, before China and the EU concluded their latest trade consultations in Beijing. UK officials initially resisted. Hamish Falconer, the UK minister for European relations, expressed surprise that European industrial exemptions might depend on the UK's treatment of a third country. Jonathan Reynolds, the UK business secretary, subsequently insisted that British trade policy would reflect British interests rather than foreign demands.

Yet Anas Sarwar, the trade minister, has since suggested acting "in lockstep" with the EU over Chinese EVs. The shift suggests that London may be overestimating the rewards of alignment after seeing the outcomes of the China-EU talks in Beijing.

Brussels appears to have made a similar miscalculation following its latest consultations with Beijing. Some EU officials have falsely portrayed the negotiated outcomes as evidence that pressure works. China's Commerce Ministry rebutted that interpretation on Oct 16, stressing that the hybrid-vehicle understanding reflected reciprocal accommodation. The Burnham government should therefore not build its China policy around Brussels' mistaken assessment that the negotiated agreement was the result of coercion.

Beijing has warned the UK to think twice, promising countermeasures if restrictions are imposed. The question is whether Brussels would compensate British exporters for losses incurred in a dispute the UK had little reason to initiate.

In his telephone talks with President Xi Jinping on Sept 8, Burnham pledged continuity in the UK's China policy and closer economic cooperation. On Oct 8, Chinese Vice-Premier He Lifeng and British Chancellor of the Exchequer John Healey reaffirmed the two sides' commitment to strengthening economic and financial ties.

Such engagements should not be casually sacrificed to the EU's distress. France and Germany are struggling with domestic political fragmentation and economic pressures. But those pressures do not entitle them to dictate the UK's economic relations with China via the EU. As the EU's largest economies, they should help stabilize trade rather than drag other countries into their woes.

Paying for European market access by importing the EU's trade tensions would squander the UK's hard-earned strategic autonomy. Worse, it would allow Brussels to collect the political benefits of protectionism while the UK shares the bill.