In recent years, trade relations between the European Union (EU) and China have become tense, particularly over alleged subsidies and tariffs in the electric vehicle (EV) sector. The EU’s plans to impose high tariffs on Chinese EV imports and its decision to protect the European automotive industry against unfair competition has led to a serious dispute between the parties.
Recent talks between EU Trade Commissioner Valdis Dombrovskis and Chinese Minister of Commerce Wang Wentao have shown that the two sides are seeking to resolve this issue in accordance with the principles of the World Trade Organization (WTO). However, although these talks have been described as “constructive”, it seems unlikely that the tensions will be resolved in the short term, given the tendency of the parties to protect their own interests.[i]
In order to protect the industrial sector, especially electric vehicles, from unfair competition, the EU has introduced tariffs of up to 36% on vehicles imported from China. This step can be explained by the fact that the EU sees the automobile industry, which employs around 14 million people, under threat. The EU Commission launched the anti-subsidy investigation after European manufacturers claimed that their competitiveness was weakening and that China was gaining an unfair advantage through state subsidies.[ii]
China, on the other hand, characterized this process as a trade war and reacted harshly to the EU’s practices. The Beijing Government applied to the WTO, stating that the EU’s plans were against international trade rules, and launched investigations into European products as a counter-move. In particular, the investigations on brandy, milk and pork products imported from Europe are steps China has taken in retaliation against the EU. Although the statements made by the Chinese Ministry of Commerce emphasize that China remains sincere and is trying to resolve the issue through dialogue, it is clear that Beijing is determined to protect its own industry.
The talks between Dombrovskis and Wang Wentao show that both sides are willing to resolve this issue through negotiations. Wang’s meetings with representatives of the electric vehicle industry in Brussels and China’s price commitment proposal to the EU reflect Beijing’s willingness to continue its cooperation with Europe. However, China calls the EU’s plans “unwarranted” and urges the EU to be more restrained in resolving trade disputes. Wang’s statements make it clear that China will make efforts to reach a compromise on this issue, but will take the necessary countermeasures if the EU insists on imposing tariffs it considers unfair.[iii]
Trade tensions between the EU and China have the potential to affect the course of not only these two economic giants but also global trade. China’s size in the global electric vehicle market and its influence on the EU’s industrial policies could alter the international trade balance. While the EU’s imposition of import duties on China aims to protect the competitiveness of European automakers, China’s retaliation could jeopardize the EU’s export market. While both Europe and China seem determined to protect their industries, the impact on global supply chains and trade relations should be carefully monitored.
At its meeting on June 12, 2024, the EU Commission reached important findings in its investigation into battery EV imports from China. The Commission provisionally found that EV producers in China benefit from subsidies and that this creates a competitive pressure on EU producers. Chinese EV producers gain a competitive advantage in the global market through state support and subsidies. The EU Commission assessed the impact of this advantage on EU producers and proposed to impose temporary countervailing duties on imported EVs to support domestic producers.
This is seen as an important step for the sustainability of the automotive sector in Europe. The Commission held talks with the Chinese authorities to discuss its findings and to resolve the issue under WTO rules. In this process, both sides sought a compromise solution to avoid damage to trade relations. If the negotiations end positively, temporary countervailing duties will not be necessary. However, if the negotiations fail, the EU will impose temporary duties.
The Commission announced the tax rates for the three major Chinese manufacturers:
- BYD: 17.4
- Geely: 20%
- SAIC: 38.1%
These duties will be imposed on a temporary basis to prevent unfair competition in the EU market. At the same time, other Chinese producers participating in the investigation but not sampled will be subject to a 21% duty. Producers not participating in the investigation will be subject to a duty of 38.1%. These temporary duties are designed as a measure to protect the EU internal market.[iv]
Trade relations between China and the EU have played an important role in shaping the global economy in recent years. Developments in the electric vehicle sector have further highlighted the economic dynamics between the two sides. The EU Commission’s anti-subsidy investigation and the imposition of provisional duties on battery EV imports from China constitute a critical threshold for the direction of these relations.
The fact that Chinese EV producers benefit from state subsidies has been found to create competitive pressure on EU producers. However, these findings have been shaped by an EU trade policy aimed at protecting its own domestic producers. Although such measures aim to create a fair competitive environment in the EU market, they have the potential to test the existing trade relations between China and the EU.
Overall, trade relations between China and the EU continue to rely heavily on dialogue and cooperation. The willingness of both sides to abide by WTO norms will be an important element that will shape future trade relations. China’s interest in the European market and the EU’s efforts to protect its commercial interests leave room for diplomacy to resolve trade tensions. Addressing this process in a multidimensional framework, taking into account not only trade but also technological and environmental factors, will contribute to a balanced and sustainable trade relationship between the EU and China.
[i] “EU, China hold ‘constructive’ talks on EV tariffs”, VOA, https://www.voanews.com/a/eu-china-hold-constructive-talks-on-ev-tariffs-/7791562.html, (Date of Access: 20.09.2024).
[ii] Ibid.
[iii] “China, EU hold constructive consultation on EV tariff disputes: China’s Commerce Ministry”, CGTN, https://news.cgtn.com/news/2024-09-20/China-EU-hold-constructive-consultation-on-EV-tariff-disputes-1x2BWnfdrc4/p.html, (Date of Access: 20.09.2024).
[iv] Ibid.
