France and Germany Propose Rapid EU Trade Tool to Counter China

France and Germany have proposed that the European Union adopt a new rapid-response trade instrument designed to restrict market access for countries engaging in what they describe as systemic, market-distorting practices. The proposal, detailed in a letter sent by French President Emmanuel Macron and German Chancellor Friedrich Merz to European Commission President Ursula von der Leyen on October 5, seeks to provide the bloc with a mechanism to retaliate against unfair trade practices, with China widely viewed as the likely focus, Bloomberg reported.

Proposed Trade Defense Mechanism

The Franco-German proposal outlines a tool that would allow the European Commission to impose counter-measures against nations that utilize dumping, widespread subsidies, or restrictions on currency convertibility to gain an unfair advantage. According to The Straits Times, the measure is intended to be implemented with greater speed than existing tools, potentially allowing for action within a matter of days. The proposal suggests that any counter-measures recommended by the Commission should be adopted unless a qualified majority of EU member states votes to oppose them.

The initiative aims to address what the French and German leaders characterized in their letter as “systemic market-distorting practices” that jeopardize the European industrial base. While the proposed instrument is not explicitly named for a single country, officials noted that it draws parallels to Section 301 of the U.S. Trade Act, a tool used to investigate and retaliate against discriminatory foreign trade practices. Beijing has expressed strong opposition to such measures, with a spokesperson for China’s Ministry of Commerce stating on October 6 that China would “respond resolutely” to any discriminatory restrictions, Global Times reported. The spokesperson further noted, “One should not impose on others what one does not desire for oneself,” adding that as a key member of the WTO, the EU must avoid “violating WTO rules” which would “undermine the rules based multilateral trading system.”

EU and China Discuss Limits on Exports

European Trade Commissioner Maroš Šefčovič is scheduled to meet with Chinese Commerce Minister Wang Wentao in Beijing on October 8 to discuss the widening trade gap and seek voluntary limits on Chinese exports, such as hybrid vehicles. While Beijing has reportedly signaled some openness to purchase agreements for European goods, the Chinese Ministry of Commerce maintains that the EU should not treat China as the source of its economic challenges. Brussels is currently seeking to include a broader range of products in these voluntary limit discussions. Meanwhile, China and the EU are maintaining dialogue under their trade and investment consultation mechanism, with the Ministry of Commerce urging the bloc to “stay on the right track of managing differences through dialogue.”

The European Commission has welcomed the Franco-German contribution, noting that it aligns with ongoing debates regarding geoeconomic risks and the bloc’s industrial competitiveness. However, the proposal faces a complex path toward implementation. Any new trade instrument requires approval from both EU member governments and the European Parliament. Some member states remain cautious, fearing that aggressive trade actions could provoke retaliatory measures from China, which has previously targeted European sectors such as cognac, pork, and dairy in response to EU trade defense moves.

Internal EU Coordination and Next Steps

In addition to the rapid-response measure, the Franco-German document calls for the development of tools to support business diversification in critical sectors and to limit reliance on single sources for essential supplies. German officials noted that the hardening of Berlin’s stance reflects growing concerns that Chinese industrial overcapacity is negatively impacting the German export-led economy. The proposal arrives shortly before an EU summit scheduled for October 15–16, where leaders are expected to discuss the bloc’s economic security and trade relations with international partners.

The current discussions follow a period of heightened trade friction, with some German companies reportedly stockpiling rare earth materials in anticipation of potential supply chain disruptions should diplomatic talks fail to resolve the deadlock.

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