EU weighs rules to cut reliance on China through broader supply chains

By Philip Blenkinsop

BRUSSELS, June 5 (Reuters) - ‌The European ​Commission is ​weighing legislation that could force companies in sensitive sectors to cut reliance on single suppliers - notably in China - and diversify to ‌at least three sources, European Trade Commissioner Maros Sefcovic said on ⁠Friday.

The proposal would be part of a broader review of EU trade defences due by the ‌third quarter, including steps to ‌speed up anti-dumping and anti-subsidy cases and potential new measures to tackle overcapacity.

"Diversification now requires a dedicated instrument," Sefcovic told a conference of the European ​Policy Centre think tank in Brussels. "We understand the urgency for critical minerals, but every high-risk sector must be weaned off single supplier dependence."

Sefcovic said ⁠that by having at least three different sources of 'critical supplies', companies would be shielded from general supply chain ​disruptions and government policies such as the export restrictions that China has imposed on certain rare earths. He did not specify ​what sectors or suppliers would be high-risk ‌or critical.

Sefcovic said EU leaders meeting in Brussels for a summit on June 18 to 19 would discuss economic security and ⁠likely provide guidance regarding what tools the Commission should focus on.

Five EU countries issued a paper last month urging the EU to revamp trade measures to defend itself ⁠more effectively against cheap imports.

The trade commissioner noted there were already EU policies encouraging companies ​to diversify if they relied on one source for 40% of certain supplies.

"Should this need to be reinforced and made more concrete? I think this is what we will look ‌at," he said.

Sefcovic also said any measure would need to be coordinated with industry and include a transition period.

"I ‌know that times are hard and the economic situation is very challenging, but we ⁠need to work with them (industry) on ‌how they would integrate ​this risk premium into their business operations. It was not needed before... this has changed," he said.

(Reporting by Philip Blenkinsop;Editing by ‌Elaine Hardcastle)

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