China wins only token victory in EU car wars
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, Sept 13 (Reuters Breakingviews) -China has won a small skirmish in its trade battle with the European Union. Spanish Prime Minister Pedro Sanchez on Wednesday said the bloc should reconsider plans to impose tariffs that rise to almost 50% on Chinese electric car exports to the region, effectively reversing Spain’s earlier position. It’s not nearly enough to upset an upcoming vote on the issue, however.
The small victory is significant, because the country was among the member states who backed levies on electric vehicles in a non-binding vote in July. There are other signs Chinese voices are being heard, too: the EU is considering slightly trimming proposed duties, Reuters reported on Tuesday.
This suggests that Beijing’s tactics are somewhat effective, despite a relatively soft approach. Its retaliatory investigations into European brandy, pork, and most recently dairy imports from the union involved annual trade flows worth less than 5% of the $282 billion in total exports from the EU to China last year, per the Economist Intelligence Unit and official trade data. And, so far, none of those inquiries have yet resulted in any actual tariffs.
However, the threats were well-aimed. Spain, for example, is by far the largest EU exporter of pork to China, shipping $1.5 billion worth of the white meat last year. A substantialpart of that trade is offal, for which China is the only sizeable market, making any blocks painful. Sanchez’s rethink raises the possibility this strategy could sway others, too.
Even so, the People’s Republic will struggle to erode enough support to completely block the tariffs at a final vote on the plan next month. That would require a qualified majority, meaning that a chunky 55% of member states representing at least 65% of the population would need to vote against the levies.
Instead, China may be hoping that EU member states fail to reach the qualified majority that would likewise be needed to pass the plan in its current form. In that case Brussels can still impose tariffs but would come under pressure to modify them. That would be possible if several large nations – say, Germany, Spain, Hungary, and Italy – abstain or vote against.
Even in that scenario, there a limit to how far Brussels can realistically cut the tariffs. Other large markets, from America to Canada and Brazil, are imposing similar or tougher levies, raising the risk that the EU becomes a dumping ground for Chinese EVs if the bloc doesn’t follow suit. And Brussels’ extensive analysis of China’s EV subsidies, which underpins its levies, means it cannot make big concessions without losing credibility.
Beijing is determined. Next week, the country’s top trade official heads to Italy, Reuters reports. But it has a long, tricky road ahead.
Follow @KatrinaHamlin on X
CONTEXT NEWS
Spanish Prime Minister Pedro Sanchez said on Sept. 11 the European Union should reconsider proposed import tariffs on Chinese-made electric vehicles, and urged Brussels and Beijing to find a compromise that avoids a trade war.
Chinese President Xi Jinping urged visiting Spanish Prime Minister Pedro Sanchez to play a "constructive role" in improving strained ties between Beijing and the EU. Xi also talked up deepening commercial ties between China and Spain in sectors such as artificial intelligence, digital economy, new energy, and other high-tech fields.
Beijing said on Aug. 29 it would not impose provisional tariffs on brandy imported from the EU despite finding it had been sold in China below market prices, and that its domestic industry had been damaged. The country’s commerce industry left open the possibility Beijing may act in future.
As well as the brandy probe, China has opened anti-subsidy investigations into dairy and pork products from the EU. The dairy probe was launched on Aug. 21, the day after Brussels published its revised tariff plan for Chinese-made EVs. The probe into pork was announced in June.
Graphic: 2023 Imports of EU goods affected by China's trade investigations (Copy) https://reut.rs/3Ber3Tm
Editing by Neil Unmack and Ujjaini Dutta
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