How the EU is rethinking trade as China alters global rules

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EU presses for faster trade reform as concerns about China and subsidies grow

EU Trade Commissioner Maroš Šefčovič warned that the current rules and procedures governing global trade are lagging behind reality. Lengthy EU decision-making, combined with a surge in China’s export capacity, is leaving European manufacturers and exporters vulnerable.

Institutions need updating, Šefčovič said: the world trade Organization needs restructuring, and the EU must speed up how it adopts trade deals. Predictability, fairness and flexibility should guide any overhaul, he argued, and state subsidies plus slow domestic approvals are among the biggest threats to firms within the bloc. When approvals drag on, market access can be weakened and enforcement diluted, so member states must act faster to shield industry and make agreements dependable.

Why WTO reform sits at the centre of the EU agenda

Brussels wants a deeper modernization of the WTO to reflect today’s economic landscape—one shaped by massive industrial capacity and strategic government support. The old bargain of reciprocal rights and obligations, officials say, doesn’t map cleanly onto economies where state backing can tilt competition at scale. Reviving a credible, rules-based multilateral system would protect market access and give smaller, export-dependent EU economies the certainty they need.

Three pillars for meaningful change
– Clearer rules on industrial subsidies and market distortions. Members must agree what kinds of state measures actually distort trade, and set firm remedies so businesses aren’t left guessing or forced into unilateral responses.
– Faster, effective dispute settlement. Long, drawn-out procedures expose firms to years of uncertainty. Quicker rulings would reduce legal limbo and cut the time companies must hedge against shifting policies.
– Updated rules for digital trade and supply chains. Cross-border data flows and complex input chains are now routine. Clear standards here would lower compliance costs and limit the chance that Trade tensions spill into technology and services.

These reforms aren’t academic. Unclear rules and spotty enforcement raise costs for companies. Firms should be reassessing contracts, beefing up compliance and mapping where they’re exposed to subsidised rivals. The EU intends to push partners for targeted, enforceable changes that protect multilateralism while giving member states tools to respond to distortions.

Balancing engagement with China — protect without shutting doors

Brussels is recalibrating its China strategy: keep economic ties open, but fortify protections against unfair practices. The concern isn’t disengagement for its own sake, but managing risks that stem from large-scale industrial subsidies, shifting industrial policies and concentrated supply chains.

The toolbox under discussion mixes defensive and preventive measures:
– Quicker dispute mechanisms and clearer definitions of prohibited state support to cut uncertainty.
– Tougher scrutiny of foreign direct investment in sensitive technologies and infrastructure.
– Active use of trade-defence instruments to respond to dumped or subsidised imports.

For companies that trade with or invest in China, this means tougher due diligence, earlier regulator engagement and stronger contingency planning for supply shocks. Expect more scrutiny of cross-border deals, higher transparency requirements, and a greater need to document compliance.

Policy options and sector focus

Delegations highlighted overcapacity and subsidised production as the main distortions sending shocks through global markets. Where output routinely outstrips demand, subsidy regimes can reshape competition.

Measures on the table include tighter FDI screening, reinforced trade-defence actions, targeted export controls on strategic tech, procurement safeguards, and stricter state-aid oversight. The emphasis from policymakers is on proportionality: defensive steps should be narrow, time-limited and evidence-based.

What firms should do now

– Map exposure to subsidised competitors and identify single points of failure in supply chains.
Strengthen contractual protections for IP and build redundancy or nearshoring where feasible.
Prepare for faster vetting of acquisitions and more frequent export licence checks—legal teams should be ready with filing packages.
Regulatory breaches could lead to fines, forced divestments or blocked transactions. Companies that anticipate changes and work with regulators will be best placed to retain market access.

Pairing defence with diversification

Institutions need updating, Šefčovič said: the World Trade Organization needs restructuring, and the EU must speed up how it adopts trade deals. Predictability, fairness and flexibility should guide any overhaul, he argued, and state subsidies plus slow domestic approvals are among the biggest threats to firms within the bloc. When approvals drag on, market access can be weakened and enforcement diluted, so member states must act faster to shield industry and make agreements dependable.0