MNI: China Should Negotiate With EU Over Potential EV Tariffs

China should deepen cooperation with European countries on electric vehicles (EV) and negotiate should the E.U. escalate its investigation into cheaper Chinese EV imports and impose additional tariffs, policy advisors told MNI.

The European Commission launched an anti-subsidy probe in early October into Chinese battery-powered cars and advisors believe it could impose temporary punitive tariffs during the investigation, which could last up to 13 months. Negotiations will help avoid further deterioration, they say.

“There is still some window period for the two sides to reach a compromise,” said Cui Hongjian, professor at the Academy of Regional and Global Governance, Beijing Foreign Studies University. “The bilateral summit by the end of 2023 is a good opportunity, as the working groups will definitely communicate before that.”

Cui believes neither side will want to risk a tariff war, though it remains uncertain whether both parties can return to the negotiating table given the EU’s rising protectionism. Dissents within the bloc will act as a counterbalance, he said, noting Germany has large EV-related investments in China, its top import source.

PATH FORWARD

He Weiwen, senior fellow at Center for China and Globalisation, said settlement of the EU’s dumping dispute against Chinese solar panels in 2013, which set a minimum price and a volume limit on imports within a certain period, could provide a guide to help avoid a trade war.

The lowest price for a China-made electric vehicle entering Europe retails for about EUR34,000, much higher than in China, but significantly lower than the EUR56,000 production cost of the EU’s cheapest model, He noted.

China should also seek to deepen EV cooperation with Germany further and potentially France, and Italy, he continued. While this probe aims to delay the entry of Chinese EVs, Europe may find it hard to fully remove Chinese companies as it develops its own industrial chain, he added.

Schmidt Automotive Research shows the share of Chinese car brands in the EU market has increased from less than 1% in 2021 to 2.8% this year. While in the EV market, Chinese automakers accounted for 8% of total sales, up from 6% last year and 4% in 2021, according to autos consultancy Inovev.

“EV is not a zero-sum game for China and EU,” said Sun Xuegong, head of the decision-making consulting department at the Academy of Macroeconomic Research affiliated with the central planning agency National Development and Reform Commission. Sun noted that strengthened cooperation rather than rivalry can create more high-quality job opportunities for both sides.

“The EU should recognise that Chinese high-efficiency and low-cost EVs can contribute greatly to achieving global climate goals and will help to realise Europe's own plan to phase out gasoline vehicles,” Sun emphasised.

Cui noted that, unlike the normal practice of responding to industry complaints, the EU had initiated this probe with France as the main instigator. Cui believes the EU bureaucracy wants to show the expansion of its power and effectiveness, as well as implement its Economic Security Strategy to cut reliance on China. The EU also hopes to ensure its lead position in green transformation, he added.

“A prominent idea in French policies in recent years is that foreign companies have to pay enough taxes in exchange for entering the European market,” said Cui. But using trade remedy measures to protect the domestic market is a “head in the sand approach,” and China and other emerging economies with lower costs will continue to challenge the EU should it refuse to carry out in-depth reform of its welfare system and labour market, Cui noted.