Macron and Merz: The EU should have new powers to exclude those who play dirty from the single market

Brussels – A safeguard mechanism which, if necessary, would lead to the immediate exclusion from the European single market of third countries seeking to prevent the restoration of fair conditions of competition. Signed by Emmanuel Macron and Friedrich Merz. The request, put forward in a letter from the French President and the German Chancellor to the President of the European Commission, Ursula von der Leyen, aims to give Brussels a powerful economic weapon in the event of escalating trade disputes. “We need a credible instrument in the hands of the Commission that allows for decisive and systematic responses (…) up to and including immediate exclusion from the single market, should this prove necessary,” reports the publication WirtschaftsWoche, which has seen the letter. The tone is general, and no specific country is singled out, but Paris and Berlin appear to have their sights set on China, which has long been accused of flooding world markets with low-cost exports through substantial subsidies and exchange rate manipulation. 

In fact, the instrument in question would enable the Commission to “counter cases where third countries deliberately attempt to undermine the restoration of a level playing field and a fair market through political or systematic distortions of our internal market.” Put simply, this means allowing the EU to respond with equal force should it be subjected to tariffs, sanctions or an economic attack. This could go as far as excluding individual companies or an entire country from the internal market. According to the plans, it would be up to the Commission to put forward the proposal to activate this mechanism, which, under the reverse qualified majority procedure, would be adopted unless a sufficient number of Member States opposed it. 

The aim, according to reports emerging from the two capitals, is not to fuel escalation, but to ensure that Europe has “equal tools” compared with other economic blocs and “flexible responses” should the need arise. In short, a sort of “second-strike weapon” to be used in response to measures taken by others. This is because developments in recent years have shown that trade can increasingly be used as “a weapon” and that the EU’s instruments, including tariffs and anti-dumping investigations, “are not sufficient.” 

The proposal comes just a few days before Trade Commissioner Maroš Šefčovič is due to travel to Beijing on Thursday for the final round of negotiations in a four-month process, during which Brussels has been seeking to rebalance the EU’s trade relations with China. Meanwhile, the European Commission “warmly welcomes” the Franco-German initiative, describing it as “a valuable contribution to the ongoing debate on how the EU can best address geo-economic risks and global macroeconomic imbalances.” The document “is in line with the European Commission’s work and with the President’s clear position on competitiveness and the approach towards trading partners, including China,” adds the spokesperson for Trade, Olof Gill. “The issue will be discussed further at next week’s European Council,” he concluded.