The Financial Times reported on May 17 that the EU is developing a plan requiring European companies to source critical components from at least three different suppliers.
According to EU officials familiar with the matter, the new regulations are being considered for key sectors such as chemicals and industrial machinery. The proposed legislation is expected to include limits on the percentage of components that can be purchased from a single supplier.
The limit is projected to be set between 30% and 40%. The remaining components must be sourced from at least three different suppliers, and these suppliers cannot all be from the same country.
This initiative is seen as a move to disrupt the China-centric supply chain structure. The EU's push for supply chain diversification follows China's export controls on key components like rare earth magnets last year, which halted some European automotive production lines.
Valdis Dombrovskis, the EU's Executive Vice President for Trade, has emphasized the need to address the EU's external trade deficit, which amounts to about 1 billion euros (approximately $1.07 billion) daily, and to respond to China's 'trade weaponization.' Dombrovskis is also reportedly advocating for punitive tariffs to counter the surge in imports of Chinese chemicals and industrial machinery that have harmed European manufacturers.
An EU official stated, "In various sectors, we are increasingly dependent on exports from China. This dependence comes with costs, so we must intensify our diversification efforts."
However, the EU's supply chain diversification plan is not solely focused on China. Another EU official pointed out that there is excessive reliance on a few countries for certain raw materials and chemical inputs. For instance, helium supplies are concentrated in the U.S. and Qatar, while cobalt comes mainly from the Democratic Republic of Congo and Indonesia.
In addition to diversifying supply chains, the EU is also strengthening trade defense measures. Previously, the EU proposed raising steel tariffs to 50% and halving the quota for low-tariff imports to protect its steel industry, which has been severely affected.
EU officials are considering allocating more steel quotas to reliable partner countries while significantly reducing quotas for others, aiming to further restrict the influx of Chinese steel.
Potential Benefits for South Korean Companies
If these measures are implemented, South Korean companies could see increased opportunities. As the EU seeks to expand its sources for critical components beyond China and reduce reliance on single suppliers, demand for alternative supply chains in sectors like chemicals, industrial machinery, and steel may rise.
The EU plans to leverage its network of free trade agreements with over 70 countries to establish new investments and supply chains. This could lead to increased collaboration with major manufacturing nations, including South Korea, as European companies look for suppliers outside of China.
However, it remains uncertain whether South Korean companies will benefit immediately. EU officials have indicated that the plan is still in its early stages. The proposal is set to be discussed at an EU Commission meeting addressing China on May 29, and if approved by the commissioners, specific recommendations could be ratified at the EU summit at the end of June.
* This article has been translated by AI.
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