Germany urged to back EU push against worsening China shock

Germany should support new European safeguards against surging imports from China if it doesn’t want to let deindustrialization run its course, according to a new report by the Centre for European Reform. 

Europe’s biggest economy will be hit especially hard by rising Chinese production of goods that long underpinned German growth, like cars, chemicals and machinery, according to the paper by Sander Tordoir and Brad Setser published Wednesday. Policy-makers in Berlin shouldn’t just wait for the shock to correct itself, but get on board with a nascent European Union push to step up measures addressing the overcapacity of Chinese
factories, they said. 

“Germany faces a strategic choice ahead of key EU debates this summer,” Tordoir said in a statement. “Either support stronger European trade defenses and industrial policy, or prepare to absorb the social and economic costs of industrial decline.”

...The CER paper argues that new instruments are necessary to respond to the threat as the EU’s current toolkit isn’t up to the task. One the one hand, trade investigations into specific products are time-consuming and cumbersome, while the bloc’s most potent trade tool — the anti-coercion instrument — is too sweeping. 

“The EU needs a tool to occupy the space in between,” the report said. The bloc could also co-ordinate its moves with partners around the world who’re equally worried about Chinese exports, it added.