EU Lists Dozens of Weak Points Where Industry’s Hostage to China

Europe needs to assess its “strategic dependencies” after being caught by surprise by radical changes to supply chains during the initial phase of the pandemic last year, according to a draft European Union document laying out the bloc’s future industrial roadmap.

The EU is “highly dependent” on some 137 products -- 6% of its total imports by value -- mainly raw materials and chemicals used by energy-intensive industries but also including active pharmaceutical ingredients and other health-care products, according to the paper seen by Bloomberg.

The analysis highlights in particular the EU’s tightrope relationship with China as it tries to keep global trade flowing while also protecting European companies against “unfair practices and foreign subsidies.” The draft could still change and is due to be finalized next week.

“About half of imports for these dependent products originate in China,” the document says, highlighting 34 products it doesn’t name which could be “more vulnerable given their possibly low potential” for EU replacements. The document states that about 20 of those products are raw materials and chemicals for the energy industry while most of the rest are needed for pharmaceutical production and other health related products.

The EU is toughening its approach to China as France and Germany push for new rules that will help the bloc to create industrial champions that can compete with the biggest firms in the global market. The European Commission, the bloc’s executive arm, will next week propose new rules to levy fines and block deals to prevent companies owned by foreign states from buying European companies.

The EU could consider building “stronger and more diverse alternative supply chains with our closest allies and partners,” the document said, adding that “stockpiling and acting autonomously whenever necessary” should also be part of the mix.

The rest of the document covers plans to better equip the single market to face future crises and facilitate the green and digital transition, particularly through the EU’s Covid-19 recovery funds.

The commission will also confirm proposals toward achieving a climate-neutral Europe by 2050, including by presenting a Carbon Border Adjustment Mechanism for some sectors.

©2021 Bloomberg L.P.

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