In early October, France and Germany released an informal diplomatic document known as a non-paper (opens pdf) that could redirect the continent’s approach to trade. Released just days before EU Trade Commissioner Maroš Šefčovič touched down in Beijing for talks with his Chinese counterpart and a week before EU leaders were slated to debate potential new protective measures, the paper urges the EU to strengthen its trade-defense, economic security, and industrial-policy toolbox in response to global imbalances and market distortions.
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What the Non-Paper Proposes
First is the strong acknowledgment of the serious problem of global trade imbalances and persistent trade deficits resulting from market-distorting practices, which must be addressed by new instruments. Not long ago, the EU dismissed US concerns about persistent trade deficits and imbalances as misguided. Now it appears to embrace the concern, albeit in perhaps a fuller and more nuanced manner.
Second is that the paper calls for greater use of traditional trade-defense tools, including anti-dumping, anti-subsidy, and safeguard measures. It also urges the EU to use existing discretionary powers more aggressively: imposing duties below calculated dumping or subsidy margins, self-initiating investigations, protecting broader categories of goods, and allocating more resources to investigations. The self-initiation point is notable because it was considered the forward-leaning aspect of the Chinese EV subsidy investigation.
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On the one hand, the lack of reference to China reflects a European conviction, also referenced in the paper, that measures should be country-neutral – that is, not obviously discriminatory. On the other hand, there is a veiled – or maybe not so veiled – implication that these measures could be employed against the US, which will undoubtedly raise eyebrows in the Trump administration.
On balance, a Europe that is stronger, more unified, and more agile in responding to economic threats is probably a better long-term partner for the US in responding to China. This is even the case, perhaps ironically, when the EU specifically declines to name China as the target and reserves its ability to act against any threat, including from the US. This administration values strength and sovereignty and has been wary of an EU that seeks to be ‘paid’ for helping with threats from China. An independent and agile Europe committed to confronting threats from market-distorting practices is a better partner for the US than one that is perceived to be doing so to curry favor.
The non-paper is a huge step forward and is meaningful simply by virtue of having been agreed. The big question over the next few weeks and months is how and whether it is implemented.
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