EU’s China Trade Imbalances Go Beyond Autos, Dombrovskis Says

A European Union deal to cap hybrid imports from China is only the first step as trade asymmetry goes far beyond cars, the bloc’s top economics official said.

“It’s clear that those economic and trade imbalances are not limited to automotive,” Economics Commissioner Valdis Dombrovskis said in a interview in Bangkok on Tuesday. “We need to continue this work also across different other sectors.”

Talks between Beijing and Brussels last week resulted in a 16-point consensus spanning trade and investment, export controls and intellectual property rights. The EU said it would institute a cap on the number of hybrid vehicles that can enter the bloc, a win for the EU’s domestic auto industry which has been struggling in the face of Chinese imports and falling demand in China for its own vehicles.

Last week’s deal “is the first tangible outcome from this consultation,” Dombrovskis said, adding that it goes beyond import caps and also includes more European market access into the world’s second-biggest economy.

The EU had a trade deficit of around €360 billion ($403 billion) last year, that “means almost a €1 billion per day,” he said. “So it’s clearly not sustainable and requires rebalancing.”

While he wouldn’t identify what sector might be next or the exact timing of further agreements, he acknowledged that the scope should be fairly broad.

“We need to move fairly quickly,” Dombrovskis said. “But it’s clear that it cannot be restricted only to automotive sectors. So I think these trials continue and we will seek quite quick deliverables.”

EU leaders meet later this week for a summit in Brussels, where they are set to discuss Germany and France’s latest proposal to adopt new powers that could sever China or other countries from its single market.

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Dombrovskis was hesitant on creating extra measures, stressing that “we already have quite a number of tools at our disposal.”

“This trade and investment dialog is about seeking engagement and seeking some negotiated solutions with China,” he said. “Unilateral action brings us into more difficult territory.”

Still, “we are ready also to use our trade defense tools if necessary if we do not see quick and tangible progress through those discussions.”