EU is pushing China to narrow the scope of metal export controls

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European Union officials are working to narrow the scope of export controls that China announced this week on two key metals used in semiconductors, solar panels and electric vehicles, according to people familiar with the matter.

The EU wants to make sure that export restrictions on the two metals are based on clear security implications and comply with World Trade Organisation rules, said the people, who are not authorised to speak publicly on the matter. A press officer for the European Commission didn’t immediately comment on the bloc’s response.

China announced that it would restrict exports of gallium and germanium and their related chemical compounds for national security reasons, as they consider the metals could be used for military purposes. The EU argues these materials are used in a wide variety of tech products and are more broadly concerned that the Chinese are weaponising critical materials.

 

Shu Jueting, spokesperson for the Chinese Ministry of Commerce, said Thursday that the EU and the US were given advanced notice of the controls. But people familiar with the matter said EU officials in Beijing were only given a short window — a matter of hours — to report back to their capitals before the official announcement. Officials in Europe found out Monday morning.

 

European officials and China have discussed the restrictions at various levels. The EU is currently beginning an assessment on what impact they will have on their industries and countries, as well as the next steps available to them, those people said. It is unclear how quickly an assessment could be completed, however, and the actual impact of the measures will depend on how severely the Chinese government decides to enforce them.

The new Chinese regulations require companies to obtain licenses for foreign shipments of the metals, giving officials some control over how tight they will be in practice.

While China told the EU that the measures were taken on national security grounds, the announcement came just days after the Dutch government published new controls that will hinder Chinese companies’ access to critical chipmaking equipment.

ASML, a Dutch company with a near monopoly on the most advanced semiconductor lithography equipment, will be barred from shipping some of its immersion DUV machines to Chinese customers. EU officials expect increasing Chinese pressure on the Dutch government to ease the export restrictions — as well as retaliation as export controls ramp up.

The EU is increasingly taking a harsher line on China. The commission’s new economic security plan was a high-level look at how the EU will decrease its dependence on China and curtail its military capabilities. The EU executive also named Huawei Technologies Co. Ltd. and ZTE Corporation as national security risks for the first time last month.

All the same, it’s a delicate balance.

Officials want to be able to intervene in a targeted way where there are military or geopolitical issues at stake, but also to maintain broader trade ties to the critical Chinese market. And they want to do all of that in coordination with the US, even though Washington often seeks to move further and faster than Brussels.

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