Maroš Šefčovič at his European Parliament confirmation hearing in November 2024, when he was commissioner-designate for trade and economic security. Credit: © European Union 2024 – Source: EP The European Commission has a plan to loosen China’s grip on the supply chains that feed European industry, and before it proposes the plan formally, it wants to find out how much of it companies are prepared to pay for. Trade commissioner Maroš Šefčovič is expected to put that question to European chief executives on 18 September. The meeting was reported by Politico, citing four people familiar with it.
Two of those people said the room will bring together chief executives from the machinery, electrical components, automotive and chemical sectors. No companies have been named. The instrument at issue is the diversification tool, which would push companies to source critical imports such as raw materials from at least three separate suppliers wherever alternatives exist. We have covered the proposal in June, when Šefčovič framed it as insurance against being punished for political reasons.
What has changed since is the sequencing: the Commission is consulting industry before drafting rather than after, which is an unusual amount of deference for a body that normally proposes first and negotiates later. The reason is cost. Three suppliers for a component that currently has one cheap and reliable source is more expensive, and the Commission needs to know where the line sits before it writes a rule that industry will spend two years trying to soften. Šefčovič told Politico he increasingly hears business leaders conclude for themselves that “the cost of diversification is smaller than the cost of disruption”, and said he is inviting key stakeholders to a special forum. The input he wants is on “the best design of such an instrument” and on securing the “buy-in for the economic leadership of our leading companies”.
The calendar around the meeting is tight enough to explain the urgency. Ursula von der Leyen delivers her State of the Union address on 16 September, two days before the CEOs arrive, and is expected to address the threat China poses to Europe’s industrial base. Šefčovič speaks to his Chinese counterpart Wang Wentao by videoconference in mid-September, then travels to Beijing in early October. National leaders meet in mid-October, and have already told the Commission to come up with new ways to tackle Chinese industrial overcapacity if the talks produce nothing. What happens if they produce nothing is not a mystery.
In an interview with Euronews last week, Šefčovič said Beijing has to deliver very concrete results, or there will be a strong political movement to push for harsher measures. He told the broadcaster he wants “some kind of proof of concept” by October, and described the current round as running at an unprecedented intensity. He did not spell out what harsher would mean, though the Commission has already stepped up trade investigations into Chinese goods, and the sectors Brussels has flagged for rebalancing include cars, medical devices and agri-food. Underneath all of it is a number that has not moved in the right direction: the EU runs a trade deficit with China of about €1bn a day.
For the technology sector, the exposure is concentrated rather than general. Chips, rare earths and the processed materials that go into magnets, batteries and optics are where a single-source dependency turns into a bargaining chip, which is why the diversification tool was pitched at those categories rather than at trade in the round. The awkwardness is that the Commission is asking companies to help design a rule that will make their own procurement more expensive, at a moment when it also wants them to invest in European capacity. Two decades of supply chain strategy optimised for the opposite.
Whether the executives in the room on 18 September have genuinely changed their minds, or have simply worked out that the rule is coming either way and would rather write it than receive it, is the thing worth watching.
