Policy Brief n.57 - A Growing Gap?
EU–China Trade Alignment in High-Tech Manufacturing. A Policy Brief by Thomas M. Rowley
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FilePB57_A GROWING GAP.pdf (1.26 MB)
Executive Summary
The EU’s share of global value-added in tech-intensive manufacturing exports has remained resilient, even as China’s ascent has eroded the shares of the US and Japan.
However, EU exports remain concentrated in increasingly vulnerable mid-tech sectors—such as autos and machinery—particularly in trade with China. At the same time, Chinese demand has already shifted, becoming a key driver of high-tech import growth.
While the EU maintains strengths in pharmaceuticals and aerospace, it faces a deepening comparative disadvantage in electronics—the sector that now accounts for over half of global high-tech trade and where China leads in imported value added. This highlights a significant missed opportunity for the EU. Moreover, the electronics that the EU does export align poorly with Chinese demand.
Amid heightened global trade tensions, Chinese firms are accelerating their push into the EU market, contributing to a rapidly growing bilateral trade deficit in tech since 2020. While higher Chinese imports may create leverage for reciprocity, this structural misalignment means that—even with improved market access—EU firms will struggle to benefit from China’s technological ascent.
Closing this gap is essential for the EU to retain its technological weight and maintain a level playing field. This requires a targeted strategy built around four priorities:
- Reinforce a broad electronics base
Accelerate the scale-up of key components and intermediates to rebuild competitiveness and expand high value-added electronics exports. - Promote collaboration
Embed EU firms in high-demand, China-linked high-tech supply chains, focusing on lower-sensitivity segments where the EU already has a stronger export base. - Recalibrate diplomacy
Link market access to verifiable openings in standards, procurement, and certification. - Equip high-tech SMEs
Provide tailored export finance, compliance coaching, and in-country support to help innovators enter China, while strengthening links between existing China-based support platforms and Europe’s domestic tech clusters.
Implementing these measures would curb strategic dependencies, support a more balanced EU–China trade relationship, and secure the EU’s long-term competitiveness in high-tech value chains—while still enabling mutually beneficial cooperation.
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
