China Economic Review: Imposing Tariffs on Chinese Electric Vehicles is Counterproductive
Release time:
2024-10-18
Recently, EU member states approved the European Commission’s final anti-subsidy proposal for Chinese electric vehicles with 10 votes in favor, 5 against, and 12 abstentions. The proposal seeks to impose definitive countervailing duties on electric vehicles originating from China. This outcome not only highlights significant divisions within the EU over the tariff issue but has also sparked widespread dissatisfaction over the EU’s disregard for member states’ differing opinions while advancing protectionist trade measures.
In September last year, European Commission President Ursula von der Leyen announced in her annual State of the Union address the launch of an anti-subsidy investigation into Chinese electric vehicles. However, the investigation was not triggered by industry complaints but was initiated directly by the Commission. This arbitrary use of unilateral trade tools to hinder Chinese electric vehicle products in Europe, either by blocking their entry or raising operating costs, severely lacks factual and legal basis. It clearly violates WTO rules and is a blatant misuse of trade remedies under the guise of protectionism.
The robust growth of China’s electric vehicle industry is not, as some in the EU allege, heavily reliant on government subsidies. Instead, it stems from sustained innovation by enterprises, a more stable and secure supply chain, higher industry concentration, stronger market competition, and the support of a vast domestic market that enables rapid product and technological iteration. These factors have collectively driven breakthroughs in production and sales scale, technological innovation, and supply chain development, creating a global competitive advantage. Moreover, as the world’s largest producer and consumer of electric vehicles, China has significantly enhanced the global supply of green public goods and made important contributions to combating climate change.
The EU’s pre-determined stance and investigative practices in this case violate its commitments to principles of objectivity, fairness, non-discrimination, and transparency. Consequently, the final conclusions lack fairness, compliance, and rationality. In its final disclosure on the anti-subsidy investigation, the EU admitted that Chinese electric vehicles have not caused substantial harm to EU automakers. Instead, it cited speculative “risks,” which amounts to little more than conjecture. If unfounded “risks” can justify trade protectionism, undermining the multilateral trade system based on WTO rules, the EU’s long-standing advocacy for free trade would lose its credibility.
The release of the final anti-subsidy proposal has drawn public opposition from several EU member states and businesses. Hungarian Prime Minister Viktor Orbán stated that Hungary opposes the EU’s tariff measures, arguing that they will harm the EU’s competitiveness. Mercedes-Benz declared that “the proposed countervailing duties by the European Commission are a mistake and could have profound negative consequences.” BMW Group noted that “the EU’s imposition of additional tariffs on Chinese electric vehicles is entirely unworkable. This approach not only fails to enhance the competitiveness of European automakers but could harm companies operating globally. Additionally, the tariffs would restrict the supply of electric vehicles to European consumers, thereby delaying Europe’s progress towards low-carbon transportation.”
The sluggish transition of Europe’s automotive industry to electrification is not due to risks posed by Chinese electric vehicle exports but rather stems from inconsistent policies and slow responses by European companies. On the one hand, the European Commission’s decision to allow the sale of new vehicles using synthetic fuels after 2035 reflects yet another compromise on its “combustion engine ban.” On the other hand, high prices for European electric vehicles, inadequate charging infrastructure, and significant investment requirements in R&D, production, and sales have hindered market performance and forced companies to slow their electric vehicle plans.
Some suggest that certain EU member states supported the tariffs to “force” Chinese companies to invest in Europe. The rationale is that imposing countervailing duties on Chinese electric vehicles would obstruct their exports to Europe, compelling Chinese companies to establish factories there. However, this approach is shortsighted. Past experience shows that trade barriers are unlikely to stop the progress of innovative products and technologies. In other words, good products can overcome non-market resistance to a significant extent. For businesses, an open and fair market environment is the most attractive factor for investment. The EU cannot both impose tariffs on Chinese products and expect Chinese companies to invest in Europe. As noted by the China Chamber of Commerce to the EU, imposing high tariffs on Chinese electric vehicles will not enhance the resilience of local industries in Europe or other markets. Instead, it will deter Chinese investment in Europe, ultimately weakening the competitiveness of the European market and the vitality of the global electric vehicle supply chain.
Notably, after EU representatives approved the final anti-subsidy proposal, EU officials also expressed a willingness to continue negotiations to resolve the issue. In light of rational calls from both inside and outside the EU, we hope the EU and China can work towards mutual understanding and reach an acceptable resolution as soon as possible.
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