China’s response has arrived. After the European Union officially imposed additional duties on Chinese electric cars, Beijing said it had referred the issue to the World Trade Organization (WTO). The accusation against Brussels is of having imposed “protectionist” taxes on electric cars imported from the Asian country, the cost of which will increase by up to 35 percent.
To avoid this decision, the People’s Republic had already adopted a series of counter-measures, launching investigations and restrictions on imports of dairy products, pork and cognac from EU countries. All moves that did not prevent the European executive from adopting the regulation, based on the accusation that producers based in China were creating unfair competition thanks to subsidies from Beijing. The EU thus intends to protect the European automotive industry, which employs around 14 million people, but has fallen into a deep crisis, as demonstrated by the recent decisions taken by Volkswagen regarding the closure of three plants in Germany.
How much more will Chinese electric cars cost?
The decision had been under consideration for months, but on 29 October it was published in the Official Journal of the EU. This is the last formal step required to make the decision on tariffs on Chinese electric cars operational, which will come into force from 31 October. In this way, a surcharge of up to 35% will be applied to the 10% tax already in force on Chinese-made battery-powered cars.
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The decision will be valid for five years. The amount of surcharges will vary by manufacturer, based on the estimated level of subsidies received. From a document sent to member countries on September 27, it appears that for Tesla cars produced in Shanghai the additional taxes will amount to 7.8%. Instead, they will reach 17% for the BYD brand, 18.8% for Geely and 35.3% for SAIC. The other groups that collaborated with the European investigation will have to pay a surcharge of 20.7%, compared to 35.3% for those that did not collaborate.
Beijing calls for EU tariffs on electric vehicles to be invalidated
In EU countries, the market share of Chinese electric cars has exploded recently, going from less than 2% in 2020 to more than 14% in the second quarter of this year. Beijing immediately moved to invalidate the regulation. “China neither approves nor accepts this decision. It has filed legal action under the dispute settlement mechanism of the World Trade Organization (WTO),” a spokesperson for China’s Ministry of Commerce said on October 30.
“China will continue to take all necessary measures to firmly safeguard the rights and legitimate interests of Chinese companies,” he stressed, denouncing the EU’s ‘protectionist approach’. Brussels for its part maintains that this is not a punishment against Beijing. The law aims to restore fair competition conditions with producers, accused of benefiting from Chinese public subsidies.
The difficult negotiations between Brussels and Beijing
However, relations between Brussels and Beijing did not end abruptly. “We welcome competition, but it must be based on fair competition rules,” said Trade Commissioner Valdis Dombrovskis, who described the European measures as ‘proportionate’ and ‘targeted’. The EU executive defended itself, claiming that it had conducted negotiations with Chinese Trade Minister Wang Wentao with Dombrovskis right up until the end, in an attempt to find an agreed solution.
The results, however, did not arrive until the adoption of the regulation. Brussels and Beijing have nevertheless agreed to continue consultations. The removal of the surcharges could be achieved if agreement was reached on other means to offset the negative effects produced by the EU measure. China’s Ministry of Commerce called on Brussels to follow “the principles of pragmatism and balance”, “taking into account each other’s major concerns, so as to reach a solution as soon as possible”.
China’s anti-dumping measures on pigs and cognac
Beyond the conciliatory words, the People’s Republic has already threatened to attack European interests. The first reaction was to launch anti-dumping investigations into pork, which is imported in enormous quantities especially from Spain. Same move made on dairy products and wine-based spirits imported from Europe, including cognac, France’s flagship product. All actions aimed at destabilizing EU countries based on their specific economic interests. A strategy that has brought about results, but only partial ones. The tariff regulation was not unanimously agreed upon.
Germany, together with Hungary, Slovakia, Slovenia and Malta voted against the taxes proposed by the Commission, but were unable to reject them. Ten member states, including Italy, France and Poland, spoke in favour. Twelve abstentions, including Spain and Sweden. Not even European car manufacturers agree on the effectiveness of the measure. The German automotive lobby (VDA) has made it known that the EU thus risks triggering a “trade conflict”. This is because some of the main European car manufacturers, the German ones in particular, have a strong presence in China, which is currently the largest market in the world for electric vehicles. The automotive giants therefore fear paying dearly for the anti-China tariffs.
