France, Italy and the Netherlands are among them. The usual suspects voted: Germany, Slovenia, Slovakia, Hungary. However, twelve countries, including Greece and Cyprus, abstained from voting. The same was done by Spain, whose Prime Minister had made statements to the Commission to “rethink it”.
The fact that neither the countries in favor nor the countries against gather a majority sends the decision back to the Commission. So the EU trade war with China begins!
In a statement, the Commission sees this as support: “Today, the European Commission’s proposal to impose definitive countervailing duties on imports of battery electric vehicles (BEVs) from China received the necessary support from EU Member States for approval of duties. This is another step towards concluding the Commission’s anti-subsidy investigation.”
“At the same time, the EU and China continue to work hard to explore an alternative solution that should be fully WTO compatible, sufficient to address the injurious subsidies found by the Commission’s investigation, traceable and enforceable. The executive regulation of the Commission that will include the final findings of the investigation must be published in the Official Gazette no later than October 30, 2024,” he added.
What does abstinence mean?
The high number of abstentions reflects long-standing misgivings about how Europe should stand up to China. Although the political consensus says Beijing’s unfair trade practices deserve a forceful, unified response, fears of trade retaliation appear to have dampened the resolve of many capitals as the date that will decide the reversal draws closer.
It is up to the Commission, which has sole powers to set the bloc’s trade policy, to break the deadlock and ensure the tariffs go through.
Given the Commission’s serious concerns about China’s extensive use of subsidies to promote domestic producers and the ability it allows them to sell their electric vehicles at artificially low prices on global markets, the conclusion is not surprising.
The executive body has previously warned that without strong action, EU car manufacturers will suffer unsustainable, possibly irrecoverable losses and be pushed out of the lucrative net-zero mobility market, with dire consequences for 2.5 million direct and 10 .3 million indirect jobs across the bloc. The block industry is already in turmoil due to high energy prices, sluggish consumer demand and tough global competition.
The additional duties are designed to offset the harmful effects of subsidies and close the price gap between Chinese and EU businesses. They vary by brand and their level of cooperation with the Commission’s investigation:
- Tesla: 7,8%
- BYD: 17%
- Geely: 18,8%
- SAIC: 35,3%
- Other electric vehicle manufacturers in China who cooperated in the survey but were not individually sampled: 20.7%
- Other EV producers in China that did not cooperate: 35.3%
The duties will come into effect in November and will be collected by customs officials.
They will be added to the existing rate of 10%. This means that, in practice, some Chinese carmakers will soon face tariffs of more than 45% when they try to import their products into the single market.
Beijing and Berlin, the main losers
Friday’s resolution is sure to unleash Beijing’s ire.
From the start, China has denounced the Commission’s investigation as a “bare act of protectionism”, consistently denied the existence of subsidies, called the findings “artificial and exaggerated” and threatened retaliation against the industries dairy products, cognac and pork of the EU, raising alarm bells in some capitals.
Meanwhile, Chinese officials have been engaged in intensive talks with their EU counterparts to secure a political solution that could prevent additional tariffs. One possible option is to commit producers to determine minimum prices for their electric vehicles, although implementing this solution could prove difficult and vulnerable to loopholes.
Despite Friday’s resolution, EU-China negotiations will continue until October 30, the legal deadline set by the Commission’s investigation.
The talks are also a top priority for Germany, which fears Beijing’s titan could inflict further pain on its flagging economy. German companies have spent the past two decades expanding their business ties with China as a way to sell their exports to its increasingly wealthy middle class. Any retaliation could seriously damage these well-developed ties.
“Of course, we have to protect our economy from unfair trade practices,” Chancellor Olaf Solz said this week. “However, our reaction as an EU must not lead to harming ourselves. This is why negotiations with China on electric vehicles must continue.”
That the tariffs will eventually go ahead reveals Berlin’s diminished influence in Brussels, where infighting within Solz’s three-party coalition has often caused frustration and irritation among diplomats.
The introduction of tariffs also acts as a confirmation of Ursula von der Leyen’s China policy. The Commission chief has won praise for her clear, objective strategy for dealing with Beijing, closing a chapter on political complacency now blamed for the myriad critical dependencies the bloc has built with China.
With the political victory under her belt, von der Leyen is in a position to continue her policy during her second term.
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