Issue Limits of trade defence against Chinese overcapacity and the need to rebuild European capacity

Summary

The EU is answering subsidy-driven overcapacity with trade defence, import surveillance, economic-security tools and industrial policy at the same time. Anti-dumping and countervailing duties, such as the definitive duties on Chinese battery electric vehicles, and safeguards each require specific legal conditions and cannot on their own fix the structural causes of overcapacity or European firms' technology and cost gaps. The Foreign Subsidies Regulation, investment screening, the International Procurement Instrument and the Anti-Coercion Instrument address distortions from foreign subsidies, strategic acquisitions, closed procurement markets and coercion, complementing fair competition rather than targeting overcapacity directly. In electric vehicles and batteries, where Chinese strength rests on accumulated technology and industrial ecosystems, trade defence alone is judged unable to close the gap. The report therefore argues that the response must pair trade measures with domestic technology development, production growth, supply diversification and demand creation through laws such as the Critical Raw Materials Act, the Net-Zero Industry Act and the Chips Act, and it warns that conflicts like the one over EV duties could recur.