Editor’s Note
As geopolitical tensions reshape global trade, the EU is taking a firmer stance on economic security. This article examines Brussels’ push to reduce trade imbalances and strategic dependencies, particularly regarding China, alongside new measures like the Critical Raw Materials Act.
While the Russia-Ukraine war and the Israel-Hamas war are simultaneously ongoing, a ‘war without gunfire’—a trade war—is also sweeping across the globe. The European Union (EU) is intensifying trade pressure on China while also escalating sanctions against Russia, which started the war. Furthermore, it has finally passed the ‘Critical Raw Materials Act (CRMA)’ aimed at reducing dependence on third countries for critical raw materials. In the United States, voices are growing louder that Chinese battery companies collaborating with Korean firms to enter the U.S. market must be blocked, related to the electric vehicle subsidy provisions of the Inflation Reduction Act (IRA).
As the possibility of a China-European Union (EU) summit in early December is being raised, the EU’s top trade official mentioned the need to rebuild trust with China and reiterated demands, including resolving the trade deficit issue.
According to Chinese economic media Caixin, Valdis Dombrovskis, Executive Vice-President of the European Commission, said in a video address at the ‘Caixin Summit’ in Beijing on November 9, “Currently, EU-China relations are facing several ‘tests’.”
He added, “This path (of drifting apart) will diminish or erase the benefits that China and Europe have enjoyed together over the past decades. Therefore, let’s make the right choice.”
He specifically targeted the trade deficit issue that the EU has been demanding China to improve. “Taking the economic and trade sphere as an example, the massive trade volume between the EU and China has made this bilateral relationship the most important bilateral trade relationship in the world, but from the EU’s perspective, this relationship is still unbalanced,” he said.
He added, “Ultimately, how solid the EU-China relationship is will be measured by results. The EU-China summit to be held at the end of this year will also be an opportunity to review the relevant achievements once again.”
China expressed strong concerns regarding the EU’s anti-subsidy investigation into Chinese-made electric vehicles and the ban on Chinese telecommunications equipment companies’ participation in the region’s 5G network business.
Wang Wentao, China’s Minister of Commerce, met with Thierry Breton, the EU Commissioner for Internal Market, in Beijing on November 10 to discuss China-EU economic and trade relations. The Ministry of Commerce explained that Minister Wang focused on expressing concerns about the EU’s initiation of an anti-subsidy investigation into Chinese electric vehicles and restrictions on Chinese companies’ participation in 5G business.
Commissioner Breton had urged all EU member states in June to ban the use of equipment from Chinese companies Huawei and ZTE. At that time, Commissioner Breton stated that only 10 out of 27 member states had implemented the 2020 Commission guideline on excluding ‘high-risk suppliers’ from 5G networks, saying, “The pace is too slow, and this poses a major security risk,” as the reason for the Huawei/ZTE ban.
The EU also launched an investigation last month into subsidies related to Chinese electric vehicles, alleging that Chinese EVs receiving subsidies and lowering prices are distorting the market.
The EU announced its 12th sanctions package against Russia related to the war in Ukraine on the 15th. Prior to this, Josep Borrell, the EU’s High Representative for Foreign Affairs and Security Policy, stated on the 13th that this sanctions package would include measures to ban imports of Russian diamonds. This is to prevent Russia’s diamond sales revenue from being used for the costs of the war in Ukraine.
Russia, which accounts for about one-third of the global diamond production market, is known to earn over $4 billion (approximately 5.2 trillion won) annually from diamond exports.
Out of the total global diamond production of 119.96 million carats last year, 41.9 million carats are known to have been produced in Russia. This is a significantly higher figure than Botswana (24.5 million carats), the largest diamond producer on the African continent. Since 2004, Russia’s share of global diamond production has fluctuated between 22% and 33% annually, but last year it reached 35% for the first time.
Expert forecasts on the effectiveness of the EU’s diamond sanctions are mixed. Konstantin Asaturov, Managing Director of ‘Sistema Capital’, said in an interview with Forbes Russia that India’s diamond imports and polished diamond exports are already declining, predicting, “These sanctions will deal a fatal blow to Russia and Alrosa.”