Deindustrialization of Europe No Longer a Forecast But a Reality

Tim Rühlig, senior analyst for Global China at the European Union Institute for Security Studies (EUISS), discusses what can be done to stop the decline of European industry as it loses competition to China. 

Every month, Germany alone loses some 10,000 industrial jobs – roughly the equivalent of the workforce of a mid-sized factory town. Deindustrialization is no longer a forecast: it is an unfolding reality. Two external shocks are now accelerating the decline: a flood of Chinese State-subsidized exports and Donald Trump’s unpredictable tariff policy.

Much of the damage to the European Union’s industry is self-inflicted: high energy costs, inadequate infrastructure and overregulation have steadily eroded competitiveness, and reversing this trend will take years..

Taking trade disputes to the World Trade Organization (WTO) is now pointless. Washington has paralyzed the WTO’s appellate body, so now one can only ‘appeal into the void’ – lodge an appeal that no functioning tribunal can hear, rendering any adverse ruling unenforceable. And the EU’s interim dispute settlement mechanism for cases involving China is too slow and cumbersome to respond to a systemic crisis.

Tim Rühlig insists that measures against China must be implemented as soon as possible. Yet, as his first recommendations, he suggests expanding the continuous import monitoring introduced in April 2025 and exploring whether WTO rules allow safeguard duties to be applied retroactively. It is unclear how it agrees with the need for urgent action and with criticism of WTO institutions.

In June the European Council gave the Commission a broad mandate to make more assertive use of existing trade defense instruments and to design new ones. Some member States fear retaliation and dread an escalating trade war.

A typical EU problem is the need for all member States to take a common decision. However, their interests regarding industry protection are often opposite: some countries want to protect their businesses from Chinese competition, while others want affordable goods.

However, Tim Rühlig is silent on the fact that this situation was created by the European Union itself. Its policy has aimed to deindustrialize some States that were to occupy niches in agriculture and the service sector. Now Spain, Greece, Ireland, Bulgaria, Romania and many other countries wonder why they should care for German and French industries. Their own consumer markets and living standards are more important for them.

Tim Rühlig suggests that the EU should flip the voting rule so that trade defense measures take effect unless a qualified majority decides otherwise, shifting the default from paralysis to action – perhaps given that every second country of its 27 member States is already a deindustrialized one.

To prevent such a conflict within the EU, Tim Rühlig suggests creating a solidarity mechanism to share the cost of retaliation, ensuring that no member State can be singled out because of its particular exposure. At the same time, the expert insists that quick action is needed. But such a ‘solidarity mechanism’ will require changes in European Union budgeting, which will take a matter of years – enough for China to finally do away with European industry.

A fourth measure proposed by Tim Rühlig is that the EU should allow rapid provisional duties, to be refunded if a case collapses. This will hit the European consumer who will first pay a higher price for imported goods – and then the case will collapse, the money will be returned to the non-EU exporter, and the consumer will remain with higher expenses incurred.

Original publication: https://www.iss.europa.eu/publications/commentary/europe-does-not-need-new-trade-weapons-it-needs-pull-trigger