The European Commission wants to force companies to diversify suppliers of critical components in order to reduce dependence on China and protect the Union’s economy from so-called “geopolitical uses” of supplies: Beijing, in fact, often resorts to export restrictions on raw materials and electronic components as a pressure tool on foreign governments.
WHAT THE COMMISSION’S PROPOSAL ON SUPPLIERS PROVIDES
More specifically, the Commission’s proposal – expected to be presented on May 29, but anticipated by the Financial Times – sets a limit on the share of components a company can purchase from a single supplier, set around 30-40 percent of total demand. The remaining part must be distributed among at least three different suppliers, who also cannot all be based in the same country. In this way, the Commission aims to reduce the risk of supply disruptions and ensure continuity of production activities in factories.
The obligation concerns companies operating in key sectors such as chemicals and industrial machinery manufacturing.
– For further reading: Why is the European chemical industry getting worse?
“IN MANY SECTORS WE ARE BECOMING DEPENDENT ON CHINA”
Some Commission officials explained to the Financial Times that Brussels wants to protect companies from the “instrumentalization of trade” by Beijing.
“In many sectors we are progressively becoming dependent on exports from China,” said one of these officials: “dependencies have a price,” he added, “and therefore we must double our efforts” for diversification.
The official also said that Chinese investments in the manufacturing sector, supported by large public subsidies, represent a threat to the European Union’s industrial base. For the Chinese government, however, the Union would be “pursuing protectionism under the guise of ‘fair competition’.”
NOT ONLY CHINA
Another Commission official explained to the Financial Times that the obligation to diversify suppliers is not a measure designed exclusively against China, but more generally aims to reduce the European Union’s commercial dependencies. The bloc, in fact, sources raw materials and chemicals from a limited group of countries: most of the helium it imports comes from Qatar and the United States, for example, while cobalt for batteries comes from Congo or Indonesia.
Brussels has also announced that it will leverage its network of trade agreements with over seventy countries to develop new supply chains.
NEW TARIFFS?
Finally, European Trade Commissioner Maros Sefcovic (in the photo) is working on a series of tariffs on Chinese chemicals and machinery products to rebalance the trade balance between Brussels and Beijing: Europe has a deficit of 1 billion euros per day.
At the end of April, Sefcovic signed a memorandum of understanding on critical minerals with U.S. Secretary of State Marco Rubio aimed precisely at reducing dependence on China.
