Editor's Note: Greetings! Friday's voting on the year-long anti-subsidy investigation into Chinese electric vehicles (EVs) came with a disappointing outcome from the EU member states' vote: 5 opposed, 12 abstained, and 10 in favor. The European Commission (EC) is now authorized to impose high anti-subsidy tariffs on Chinese EVs. In response, China's Ministry of Commerce strongly opposes this protectionist measure by the EU, emphasizing the need to resolve disputes through dialogue and consultation. The next round of consultations is reportedly scheduled for October 7. The business community urges the EU to deter implementation of the tariffs to make more room for negotiations. Dive into this edition of the CCCEU Weekly Update for the latest insights on China-EU dynamics. Enjoy reading and have a fantastic weekend! 

Focus

Brussels, Belgium, October 4, 2024 – At 10:00 AM, the Trade Defence Instruments (TDI) Committee of the European Commission, representing EU member states, began voting on a single agenda item: the EU's final anti-subsidy investigation proposal against Chinese electric vehicles (EVs). One year ago, the European Commission announced the initiation of an anti-subsidy investigation into EVs originating from China.

Approximately an hour later, the sword of Damocles hanging over China's EV industry chain fell heavily. The voting results showed 10 countries in favor, 5 against, and 12 abstentions. This outcome grants the European Commission the authority to impose hefty anti-subsidy tariffs on Chinese EVs for a five-year period.

According to media reports, the detailed voting breakdown is as follows:

Against (5): Germany, Hungary, Malta, Slovenia, and Slovakia.

Abstentions (12): Belgium, Czech Republic, Greece, Spain, Croatia, Cyprus, Luxembourg, Austria, Portugal, Romania, Sweden, and Finland.

In Favor (10): Italy, France, Netherlands, Estonia, Lithuania, Latvia, Poland, Denmark, Bulgaria, and Ireland.

In terms of population, the countries that voted against represent 22.65% of the EU's total population, those that abstained account for 31.36%, and those in favor represent 45.99%. To block the tariff implementation, at least 15 countries representing 65% of the EU population would have needed to vote against the proposal.

After the vote, the EC issued a statement declaring that the final proposal had "received the necessary support." It also mentioned that the EU and China would continue exploring alternative solutions that "would have to be fully WTO-compatible, adequate in addressing the injurious subsidization established by the Commission's investigation, monitorable and enforceable." Furthermore, the Commission stated that Implementing Regulation including the definitive findings in the investigation would be published no later than October 30, 2024.

The EC had previously outlined tariff rates: in addition to the existing 10% duty, anti-subsidy tariffs on EVs imported from China would be imposed. Tesla would face an additional 7.8% tariff, BYD 17%, and Geely 18.8%. Other companies that cooperated with the investigation would be subject to a 20.7% tariff, while SAIC Group and those that did not cooperate would face a 35.3% tariff.

Industry calls for deterring anti-subsidy tariffs

The Chinese Ministry of Commerce and the China Chamber of Commerce to the EU (CCCEU) immediately expressed strong opposition and dissatisfaction with the voting results. The Chamber urged the EU to postpone the implementation of high anti-subsidy tariffs, a request that garnered attention from media outlets.

During a midday press briefing on October 4, the EC spokesperson was asked for comments on the CCCEU's call to delay the tariffs. The spokesperson did not provide a direct response.

The Chamber noted that, under Article 24(4) of the EU's Anti-Subsidy Regulation, "Countervailing measures can be suspended by the EU Commission when market conditions have temporarily changed, and injury would be unlikely to resume as a result of the suspension."

The call for postponing the tariffs is a shared concern within the China-EU EV industry. The Chamber's request is intended to encourage the EU to demonstrate political willingness to resolve issues through dialogue, avoid escalating trade tensions, and allow more time for negotiations. A suspension would create the necessary space for both sides to work out a price commitment agreement.

Spain and Sweden shift voting stance

Notably, some member states reportedly changed their positions shortly before the vote. An hour before the voting, Sweden's Minister of Foreign Trade, Benjamin Dousa, confirmed via Reuters that Sweden, which had initially reportedly intended to vote against the tariffs, would abstain in this crucial vote. According to the report, Sweden changed its stance after communication with the EC, which offered "special arrangements" for Sweden's automotive industry, including Volvo Cars, potentially securing a separate tariff agreement for the company.

Spain also altered its final vote from "against" to "abstention." Reuters reported that Spanish Economy Minister Carlos Cuerpo had written to EC Vice President Valdis Dombrovskis, stating that the EU should not impose tariffs but instead "keep negotiations open... beyond the binding vote" to reach agreements on pricing and battery production relocation to the EU. Cuerpo emphasized, "We need to strike the right balance, technically and politically, to defend our industrial interests while avoiding large-scale confrontations with strategic players like China."

As the EU's second-largest car manufacturer, it is worth noting that Volkswagen and Renault are among the carmarkers already producing EVs in Spain. Besides, Chinese automaker Chery Auto has already signed a joint venture agreement with Spain's EV Motors to establish its first European factory.

Analysts suggest that Spain's letter, "leaked" on Thursday, may have a degree of political maneuvering. Given that "price commitments" will continue after the tariff vote, Spain's move could be a precaution against potential Chinese countermeasures. Notedly, Spain is the EU's largest pork exporter, and China has previously conducted anti-subsidy investigations on Spanish pork imports.

Germany and Hungary Firmly Oppose

Germany, the EU's largest economy, and Hungary, currently taking the realm of the rotating presidency of the Council of the EU, both firmly opposed the tariffs on Chinese EVs. Reports indicate that Germany abstained during a non-binding vote in July, but since then, pressure from the industry has intensified. Major German labour union IG Metall and representatives of leading car manufacturers also issued statements on Thursday, saying that Germany should vote against the tariffs.

In an interview with Hungarian state radio on Friday morning, Prime Minister Viktor Orban criticized the EU's economic strategy as an "economic cold war." He stated, "Hungary seeks to avoid alignment with any single bloc, aiming instead to engage in trade with both sides." Orban emphasized that if the global economy splits into two opposing blocs, selling EU-manufactured products within such a divided market would become increasingly challenging. He also expressed uncertainty about Hungary's ability to maintain an effective strategy of economic neutrality between the two sides.

The voting result will undoubtedly have a profound impact on the China-EU EV supply chain and future economic and trade relations. The Chamber hopes the EU will approach the situation from the perspective of upholding multilateralism and promoting green objectives, working with China to find a constructive solution through dialogue and consultation, thus creating more opportunities for cooperation in the green transition.

Hot Topics

Leaders of European countries send congratulations on PRC's 75th founding anniversary

Xinhua reported on October 1st that leaders of European countries have recently sent messages or letters of congratulations to Chinese President Xi Jinping, also General Secretary of the Communist Party of China (CPC) Central Committee, on the 75th anniversary of the founding of the People's Republic of China (PRC).

Chinese president appoints new ambassadors

Xinhua reported that Chinese President Xi Jinping has appointed the ambassadors in accordance with a decision of the Standing Committee of the National People's Congress (NPC). According to a statement from the NPC Standing Committee on Monday, Cai Run was appointed ambassador to the European Union (EU), succeeding Fu Cong.

China's Ministry of Commerce comments on the EU vote on EV tariffs

On Friday, a spokesperson for China's Ministry of Commerce responded to questions regarding the EU's vote to green light the definitive measures of the bloc's anti-subsidy tariffs on Chinese EVs. The spokesperson stated that China firmly opposes the EU's unfair, non-compliant, and unreasonable protectionist practices in this case and strongly opposes the imposition of anti-subsidy tariffs on Chinese EVs.The spokesperson noted that since the end of June, China and the EU have conducted more than ten rounds of technical consultations at the director level and two vice-ministerial consultations on the EV anti-subsidy case. On September 19, Minister Wang Wentao held comprehensive, in-depth, and constructive talks with EC Executive Vice President and Trade Commissioner Valdis Dombrovskis. During the discussions, both sides expressed a clear political willingness to resolve differences through consultations and agreed to start price commitment negotiations to avoid an escalation of trade frictions. In the 14 days that followed, the China-EU technical teams conducted six rounds of technical consultations. Throughout these negotiations, the Chinese side has repeatedly and fully listened to the demands and opinions of both Chinese and European industries, demonstrating an open and cooperative attitude and showing maximum flexibility.Meanwhile, China also acknowledges the EU's expressed political willingness to continue negotiations to resolve the issues. The China-EU technical teams will continue negotiations on October 7, the spokesperson said.

EC Spokesperson Responds to Journalists' Questions on CCCEU Statement

On October 4, an EC spokesperson responded to journalists' questions regarding CCCEU's statement, which called for the EU to postpone the implementation of tariffs and resolve disputes through dialogue. The spokesperson stated that chapter of discussion on Chinese EVs has been closed and the EC will have a technical briefing to explain the relevant details.

German Foreign Minister Annalena Baerbock expected to visit China

According to the South China Morning Post, German Foreign Minister Annalena Baerbock is set to visit China "in the coming days" against the backdrop of potential turning points in conflicts in Ukraine and the Middle East.

Xpeng: We are coming to Europe to bring technology

According to Reuters, Chinese EV maker Xpeng's board vice-chairman and co-president Brian Gu said that the carmaker was not planning to sell its cars in Europe to provide a cheap alternative but to bring its technology. "We are providing products based on what we think is a value proposition of quality, design, and technology. We would love the capability to access the European market," Gu said, speaking at the Global Dialogue conference in Berlin.

Europe's Global Green Ambitions Push Too Hard Once Again

According to Bloomberg, the bloc on Wednesday caved to calls from countries, including Brazil and the US, to slow down the EU's green plans. EU deforestation law delayed by a year amid widespread protest. Businesses had complained about a lack of clarity on the plans.

China to host opening two events of 2025 Diamond League, final in Zurich

Reuters reports that Zurich will stage the two-day season finale of the 2025 Diamond League in August while the competition will begin with two meets in China, organisers said on Wednesday. Xiamen will host the opening event on April 26, a week before Shanghai/Suzhou. Meetings in Doha and Rabat are scheduled for May before the first European meet in Rome in June.

Euro zone business activity contracted in September, PMI shows

According to Reuters, eurozone business activity slipped back into contraction last month, although the downturn was not as steep as initially thought, according to a survey from Reuters that also showed inflationary pressures had eased. Inflation in the currency union fell to 1.8% in September, below the European Central Bank's 2% target and reinforcing an already solid case for another interest rate cut this month, official data showed on Tuesday.

What are experts talking about?

The Issue of EU "Competence Creep" and Its Formation Path in Times of Crisis

Source: Institute of European Studies, Chinese Academy of Social Sciences

Author(s): Yang Guodong

The phenomenon of "competence creep" emerged alongside the process of European integration and has further driven it forward. While competence creep has enhanced the EU institutions' ability to address challenges and crises arising during the integration process, it has also led to the gradual encroachment of these institutions into areas of competence reserved for member states. One contributing factor to the rise of competence creep is the judicial restraint shown by EU courts towards this phenomenon. Since the Lisbon Treaty came into effect, the continuous and complex crises faced by the EU have provided legitimacy for the EU to implement measures with a "harmonizing" effect in areas traditionally reserved for member states.

In response to crises, the EU has gradually developed a new pathway of competence creep through financial instruments, aimed at harmonizing the domestic policies of member states. The EU's responses to the public health crisis and the rule of law crises in certain member states are the clearest applications of this approach in both its positive and negative dimensions. Although the European Court of Justice has addressed some legal disputes regarding this approach, including issues of legal basis, it has sidestepped concerns over the infringement of the principles of subsidiarity and solidarity. In effect, this pathway grants fiscally stronger states the power to interfere in the domestic affairs of weaker states through EU mechanisms. The fiscal imbalance between member states ultimately translates into political inequality, planting structural contradictions within the process of European integration.

The High Cost of Excluding Chinese Technology

Source: Project Syndicate

Author(s): Michael Spence

China is transitioning to a sustainable economy by investing heavily in green technologies and using its large domestic market to lower costs. Over half of the new cars sold in China are electric or hybrid, and solar power is much cheaper there than in the US or Europe. As the world's largest carbon emitter, China's green progress could help reduce global emissions and speed up the shift to clean energy worldwide. However, trade policies, particularly high tariffs from the US and similar moves by the EU, pose a major obstacle. These policies aim to protect domestic industries and address geopolitical concerns but hinder the global adoption of China's affordable green technologies.

One solution could be increased Chinese foreign direct investment (FDI) in green technologies in advanced economies, similar to Japan's response to US trade restrictions in the 1980s. Such investment could lower costs and boost the green transition without significantly affecting local employment. However, challenges remain. The US has proposed a ban on Chinese hardware and software in connected vehicles, which could severely restrict FDI. National security concerns are legitimate, but policymakers need to find alternative solutions that do not harm global trade, investment, or the sustainability effort. Without such compromises, both the global economy and the green transition could suffer.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.