The mandate on China is clear, but can Europe compete rather than just protect?

After more than two hours of discussion at the June European Council, EU leaders emerged with what looks like a mandate for the European Commission to strengthen the bloc’s defences against China’s overcapacity and unfair trade practices.

While the official conclusions remained deliberately vague – referring only to a “strategic debate on global macroeconomic imbalances” – reporting from the summit indicates that leaders tasked the Commission with developing new tools to address the problem, while also maintaining engagement with Beijing. 

This represents a step forward from pure diplomatic ambiguity. For months, Brussels has been preparing measures such as the Industrial Accelerator Act and potential new instruments to counter Chinese overcapacity in electric vehicles, batteries, steel and other sectors. The Council appears to have given political cover for the Commission to move ahead with concrete proposals over the summer. 

German Chancellor Friedrich Merz was particularly blunt, stating that China was “flooding markets” through “high subsidies” and that “subsidising overcapacities” combined with a “currency that isn’t convertible freely” was “not acceptable”. He even floated the idea of “Plaza Accord”-style talks on the yuan. Such language from Berlin marks a notable hardening and gives the Commission more room to act. 

Yet two major question marks hang over this apparent mandate. 

First, will member states stay aligned when the Commission returns with specific proposals? The Council’s coded language and the decision to defer detailed discussion until October suggest that unity remains fragile. While France and others have pushed for tougher measures, several capitals remain deeply concerned about Chinese retaliation, the impact on their own exporters, and the risk of fragmenting the Single Market.

When the Commission tables concrete legislation or trade defence actions, will the same leaders who gave the green light in principle still support it in practice? Past experience shows that political cover at summit level does not always translate into qualified majority support when votes are called. 

Second, and more fundamental: what happens to fair competition based on China’s genuine innovation and scale? Protection against subsidies and overcapacity is necessary, but it is not sufficient. China has built real technological and manufacturing strengths in several strategic sectors.

Simply shielding European industry from the worst distortions will not restore competitiveness if European companies continue to lag in innovation speed, permitting, access to critical raw materials, and scale-up of new technologies. 

Without a credible “shock plan” to accelerate European competitiveness – faster permitting, coordinated public and private investment, skills programmes, and a genuine industrial strategy at EU level – protection alone risks becoming a slow-motion managed decline. The Commission’s existing initiatives (Net-Zero Industry Act, Chips Act, proposed Industrial Accelerator Act) are steps in the right direction, but they remain fragmented and underpowered compared with the scale of the challenge. 

The Council’s guidance to the Commission is therefore welcome but incomplete. It authorises defensive work on trade tools. It does not yet authorise – or even seriously discuss – the offensive industrial mobilisation that Europe needs if it wants to remain a serious player in the industries of the future. 

The coming months will reveal whether this was a turning point or another Brussels exercise in kicking the can down the road. The Commission now has a mandate of sorts. The real test will be whether member states are ready to approve what comes next – and whether Europe is finally prepared to pair protection with a serious plan to compete.