Relations between China and the EU are now at a crossroads. The EU’s ability to make right decisions and wise judgements, correct and adjust its perspective of China, and maintain a positive relationship with China will determine how the China-EU relationship develops going forward. Despite strong, justified opposition from China, as well as from within its own member states and various industries, the European Union’s decision to impose a 37.6% so-called anti-dumping duty on Chinese Electric Vehicles (EVs) is extremely embarrassing for the global liberalization of free trade and the promotion of green cooperation. This seems to be the abrupt step towards direct trade protectionism and a trade war with China.
By Ibrahim Khalil Ahasan
Announced in June 2024, the provisional duties have been in effect since July 5th, 2024, and are expected to last for four months. Following that, they may become permanent duties for a period of five years starting in November.
China has continuously pushed for communication in order to control the trade tensions with the EU and defuse the EU’s incorrect position towards China. Commerce Minister Wang Wentao is expected to travel to Europe in the coming days to address the issue with EU Trade Chief Dombrovskis. The EU must be sincere, rectify its approach, and resolve trade and economic tensions through dialogue and consultation.
In the midst of global geopolitical tensions, the EU and China should have a dialogue to find a solution that is acceptable to both parties, lower the likelihood of trade disputes, and stop tensions from rising. A mutually agreeable conclusion should result from the upcoming meeting, which should offer a way to prevent trade friction from rising. It is necessary to persuade right-wing politicians and anti-China hawks in the EU to correct their misconceptions about China.
It is no secret that any politically motivated protectionist action will not only hurt consumers and the European auto industry, but it will also harm bilateral trade, disrupt and distort global automotive supply chains and undermine efforts to achieve carbon neutrality under the EU’s “green deal plan.” Furthermore, it will intensify a trade war between the largest trade bloc and the second-largest economy in the world. According to estimates from the Kiel Institute, 20% EU tariffs on China divert about $4 billion worth of EV trade. With it reaching 37.6%, the bilateral commerce may be gravely hindered. A higher price for EVs would be detrimental to the EU’s 2050 carbon neutrality target. The sector is highly intricate, with extensive and varied supply networks. The automobile manufacturers in Europe would be negatively impacted. Thus, both parties stand to gain from the decision to remove tariffs on Chinese EVs.
There has been constant discussion among member nations and other corporate groups over the need to be more flexible in their economic connections with the World’s second largest economy. The EU is split on the imposition of tariffs, with many powerful nations indicating that they would rather reach a negotiated agreement.
Swedish premier Ulf Kristersson, for instance, voiced concerns about levying duties on Chinese electric vehicles. “Taxes on Chinese EVs are against our business interests,” stated Hungarian PM Victor Orban. The EU should abandon its plan to impose additional tariffs, as called by German Chancellor Olaf Scholz and Spanish PM Pedro Sanchez. Adolfo Urso, the Italian Minister of Industry, stated last week that he anticipated a negotiated resolution. These show that the EU’s most powerful members support increased engagement with China rather than decoupling or de-risking policies. Volkswagen, BMW, and Mercedes-Ven cautioned against the protectionist move. Therefore, ignoring the entreaties and justified stances of the governments and businesses of several EU member states would not be a prudent or realistic EU approach.
By rebalancing economic relations, especially with regard to trade and investment flows, the EU has to forge new strides in its connections with China. As the prospect of the Donald Trump era in the US looms, China and the EU must cooperate. Any kind of trade conflict or trade protectionism between Beijing and Brussels is not anticipated in light of the ongoing risks that Trump’s administration poses to global free trade liberalization and climate diplomacy, since the ramifications might be felt by the entire globe. Large economic powers, such as the EU and China, bear a significant burden of protecting free trade worldwide and advancing green cooperation, which is why passionate and pragmatic cooperation must bolster.
The fact is that China’s EV industry is successful not because of government subsidies, but rather because of open and fair competition, expanding manufacturing alliances with numerous international automakers, comparative advantages, high-end manufacturing, high-quality and affordable due to innovation, and highly skilled, inexpensive labor sources. By the end of 2022, the Chinese government completely terminated all purchasing subsidies.
Growing protectionism and fragmentation are addressed in the WTO’s 2024 edition of ‘World Trade Report’ because these undermine WTO rules. It pleaded on governments to oppose tariffs and other trade barriers, claiming that protectionism runs the danger of reversing three decades of unparalleled achievement in closing the wealth gap between wealthy and poor countries. The EU cannot disregard the fact, WTO regulations, the reality of global climate cooperation, or the spirit of free trade liberalization as one of the advocates of WTO principles.
Ibrahim Khalil Ahasan, independent columnist and freelance journalist based in Dhaka, Bangladesh.
