1. Former WTO chief Pascal Lamy has warned that Europe must take a firmer stance on China’s growing export surplus, warning of a potential industrial and political backlash that could fundamentally damage relations. [para. 1] A longstanding advocate of free trade, Lamy reluctantly concluded that the scale and speed of Chinese exports had become unsustainable, calling for a negotiated arrangement backed by a credible threat of restrictions. [para. 2] He attributes China’s distortion of comparative advantage to industrial subsidies, weak domestic consumption, and price competitiveness across supply chains. [para. 3] Lamy, who served as WTO director-general from 2005 to 2013, noted that China has begun to recognize the shift in Europe’s political mood. [para. 4]
2. Lamy welcomed recent progress on voluntary export restraints for Chinese hybrid vehicles, seeing it as a possible opening for broader negotiations, while cautioning that a lasting settlement remains uncertain. [para. 5] His preferred approach, "Plan A", is a negotiated solution, but he insists it will only succeed if Brussels first develops a credible "Plan B": a transparent, sector-specific mechanism to restrain imports, designed to be WTO-compliant. [para. 6] He stated plainly that "there will be no Plan A if Plan B is not on the table." [para. 7] He proposed a new Structural Rebalancing Instrument to serve as Plan B, and advised the EU to establish a collective insurance mechanism against possible Chinese retaliation to protect the political majority in the EU Council. [para. 21][para. 25][para. 26]
3. Lamy emphasized that the trade deficit with China is more than €300 billion a year, having doubled since Covid. [para. 29] He noted that the EU remains one of the only large, deep open markets, making this situation simply unsustainable. [para. 30][para. 31] He explained that it took him a long time to reach this conclusion because he is a deep believer in open trade, but when one country has a cost advantage across the entire supply chain combined with subsidies and structural imbalance, the traditional logic no longer works. [para. 32] If left unaddressed, he predicts deindustrialization leading to social and political problems, with far-right populists potentially taking a much tougher stance. [para. 34] He argues the deficit cannot be dramatically reduced but must be stopped from increasing, acknowledging that protection comes at a price and must therefore be selective. [para. 38][para. 39]
4. Despite proposing trade restrictions, Lamy rejected closing Europe to Chinese investment, encouraging Chinese manufacturers to move production to Europe to create jobs and transfer technology, subject to national security scrutiny. [para. 8] He deeply regrets the shelving of the EU-China investment agreement and argues for its revival, noting that what worked for European investment in China 30 years ago can work in the reverse direction today. [para. 41][para. 42][para. 45] On the green transition, he argued that for every job manufacturing solar panels, there are roughly five jobs in installation and maintenance, making cheap imports potentially a good deal, while insisting the same should not happen in machine tools or the automotive industry. [para. 59][para. 60][para. 61]
5. Regarding U.S. tariffs, Lamy downplayed their severity, stating that a 10 percent tariff is not the end of the world and is more of a problem for the U.S., explaining Europe accepted them because preserving Washington’s support for Ukraine was more important than losing a few points of market share. [para. 67][para. 69][para. 70] He emphasized that Europe needs greater strategic autonomy, not because it wants it, but because the "brutalization" of the world obliges it, requiring more growth and a completed single market in finance, energy, and digital services. [para. 72][para. 73] He mentioned the "One Europe, One Market" campaign launched to push for regulatory reforms before the next European elections. [para. 76] He also highlighted that Europe pays around 35 percent more for weapons due to a lack of a genuinely integrated defense market. [para. 79]
6. Lamy acknowledged that, contrary to the founding fathers’ beliefs, economic integration does not automatically lead to political integration, but moving into defense is breaking that glass ceiling, a transformation accelerated by Putin and Trump. [para. 83][para. 84][para. 85] He noted far-right and anti-integration forces are gaining ground, but argued political trends are not inevitable, citing examples in the Netherlands, Finland, Poland, and Hungary where the extreme right lost after being in government. [para. 86][para. 87] He concluded that part of the answer lies in improving Europe’s economic performance, which brings the discussion back to the same conclusion: Europe needs a stronger economy and must ensure some of its industrial sectors are not overwhelmed by competition from China. [para. 88][para. 89][para. 90]
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