France, Germany push for EU rapid-response trade tool with likely focus on China

By Philip Blenkinsop and Andreas Rinke

BRUSSELS/BERLIN, Oct 5 (Reuters) - France and Germany have proposed that the European Union reinforce its economy by enacting a new rapid-action measure to strike back against countries that harm it, with China the most likely focus of their proposal.

French President Emmanuel Macron and German Chancellor Friedrich Merz wrote to European Commission President Ursula von der Leyen on Monday, 10 days before EU leaders are to discuss Chinese trade imbalances at a Brussels summit.

They said "systemic market-distorting practices" jeopardise the bloc's economy and industrial base, requiring urgent action.

The commission said it welcomed the letter that accompanied a document setting out Franco-German proposals, saying it was a valuable contribution to the debate on geoeconomic risks and global imbalances. It aligned with Von der Leyen's stance on competitiveness and her approach to trading partners, including China, it added. 

The new measure would not target any specific country, but highlights dumping, widespread subsidies and restriction of currency convertibility — market distortions that many EU leaders say China is engaged in.

German officials said the EU needed a tool as powerful as the Section 301 tariffs imposed by the United States or China's restrictions on exports of critical minerals in a new world where trade is increasingly used as a weapon.

The bloc, said the document, needs to deploy its trade defence tools more swiftly and efficiently, with more investigations and a broader approach to cover whole sectors.

The document added that there was an urgent need for measures to deal with imports of chemicals, PET and hybrid vehicles. 

FRANCE, GERMANY PUSH FOR TWO NEW TRADE TOOLS

France and Germany also said the European Commission should propose two new instruments as soon as possible to focus EU efforts on diversification and securing economic security.

The first, which the Commission has already mentioned, would seek to limit companies' reliance on single sources for certain critical supplies.

The second would limit access to the EU single market for countries that undermine fair market conditions through political or economic means, without specifying what the trigger for EU reaction would be or what action the EU should take.

The paper said that any proposal by the Commission to activate counter-measures against another country should be adopted unless a qualified majority of EU members opposed — a lower hurdle than for some trade measures.

The paper also said the Commission should be able to activate such new measures swiftly, which German government officials said could mean a matter of days.

Legislation to enact a new instrument would still need approval by EU governments and the European Parliament.

A French presidential adviser said it was urgent for the EU to take action, that the imbalances with some trade partners had become unsustainable, and that France and Germany were keen for the bloc to deploy existing anti-dumping measures as soon as possible.

"France and Germany are very keen to put an end to the naivete on trade," the adviser told reporters.

(Reporting by Philip Blenkinsop, Andreas Rinke, Michel RoseEditing by Inti Landauro, Peter Graff and Jonathan Spicer )