European Union members face a pivotal vote on October 4 on whether to impose tariffs of up to 45 per cent on imports of Chinese-made electric vehicles in the EU’s highest-profile trade case, which risks retaliation from Beijing.
The European Commission, which oversees the EU’s trade policy, proposed final duties for the next five years to counter what it sees as unfair Chinese subsidies after a year-long anti-subsidy investigation.
The EU’s proposal can be blocked if a qualified majority of 15 EU members, representing 65 per cent of the EU population, vote against it. But that is a high hurdle.
France, Greece, Italy and Poland have all announced that they would vote in favour, enough to avert a blocking majority against tariffs.
In the absence of a qualified majority either way, the EU executive can adopt the tariffs. However, it could also submit an amended proposal if it wanted to secure greater backing.
The region’s top economy and major car producer, Germany, will vote against the introduction of tariffs, people with knowledge of the matter told Reuters late on October 3. It had abstained in the first non-binding vote on the proposal in July.
German carmakers, for which China represents almost a third of their sales, have been particularly vocal against tariffs. Volkswagen said they were “the wrong approach”.
While that rejection will not derail the result, the toughening stance highlights Brussels’ challenge in building support for its trade case, potentially forcing the commission to carry out a second vote and consider possible compromises.
The economy minister in Spain, a previous tariff backer, also said in a letter to European Commission Vice President Valdis Dombrovskis, seen by Reuters, that instead of imposing tariffs, the EU should “keep negotiations open… beyond the binding vote” to strike a deal on prices as well as the relocation of battery production to the EU.
Spanish Prime Minister Pedro Sanchez had already said on a visit to China that the EU should reconsider its position.
Some EU members are nervous about Beijing’s response. In moves seen as a retaliation, Beijing this year launched its own probes into imports of EU brandy, dairy and pork products.
Hungarian Prime Minister Viktor Orbán warned on Friday that the EU was headed for an “economic cold war” with China.
However, the EU‘s stance towards Beijing has hardened in the past five years, now viewing China as a potential partner in some issues, but also as a competitor and a systemic rival.
The commission says China’s spare production capacity of three million EVs per year, which need to be exported, is twice the size of the EU market. Given 100 per cent tariffs in the United States and Canada, the most obvious outlet for those EVs is Europe.
The commission has said it is willing to continue negotiating an alternative to tariffs with China and could re-examine a price undertaking – involving a minimum import price and typically a volume cap – having previously rejected those offered by Chinese companies.
One option under negotiation is minimum import prices calculated using criteria such as the range, battery performance and length of the EV, along with whether it is two- or four-wheel drive, a source familiar with the matter said.
