More transparency and a level playing field, a clear rejection of unfair competition and a stable and predictable regulatory environment. This was demanded by European Commission Vice President and Trade Representative Valdis Dombrovskis in China during a delicate visit to the People’s Republic’s institutional and business leaders. The EU commissioner sat down with the Dragon after rising tensions in recent months, essentially bringing the voice of European companies to Beijing government officials. But what was heard in the end was the trembling voice of those who, from a position of undoubtedly weak nature, made reasonable and unassailable demands. An important comparison, however, because there are huge economic relationships here, which amounted to almost 860 billion euros last year. However, these very figures, when viewed in light, reveal an unfavorable imbalance for the European Union, which has a trade deficit due to a lack of fairness and difficulties in market access for the second world power. For this reason, there was great anticipation for the Latvian Commissioner’s trip.
At the end of the 10th high-level China-EU bilateral economic and trade meeting with Vice Prime Minister He Lifeng, Dombrovskis announced that dialogue between Brussels and Beijing on trade dossiers would return to regularity. Regardless of the tensions, this is still a positive signal that shows the mutual intention to come together without prejudice to protecting their respective interests. According to the latest survey by the EU Chamber of Commerce in China, 64% of respondents described doing business in the People’s Republic as more complex last year, reaching the highest level ever measured.
The EU government representative reiterated some long-standing complaints from European companies, including China’s refusal to approve medical devices and accept some food products, while recent complaints, in addition to the new data, included those that Beijing is exploiting national security, to suppress competition Law that also requires foreign companies to store data locally. Subsequently, there were numerous complaints about China’s failure to condemn Russian aggression against Ukraine: there was a “reputational risk” on an economic level for Beijing, which “damaged the country’s image, not only to European consumers but also to companies. Dombrovskis then called on his counterpart to make greater efforts on Black Sea wheat. This initiative failed because Vladimir Putin withdrew from the agreement that blocked food supplies to developing countries.
However, the background to the tenth bilateral trade dialogue was undoubtedly the European Union’s anti-dumping investigation into the penetration of Chinese electric cars into the internal market. The investigation, announced by Commission President Ursula von der Leyen to Parliament in her annual State of the Nation address, has accelerated relations between Beijing and Brussels. “Global markets are being flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge government subsidies,” the Berlaymont Palace boss said last week. The Chinese response was not long in coming, and it was the usual one: the threat of economic retaliation. The issue was therefore the focus of Dombrovskis’ trip: “I can assure you that we will carry out this work carefully in consultation with Chinese authorities and stakeholders, adhering to tried and tested rules,” he said. in conversation with students at Tsinghua University Beijing. “The EU welcomes competition. It makes our companies stronger and more innovative. However, competition must be fair. And we will take more decisive action against injustice,” the trade commissioner added.
China, for its part, “has always opposed any form of trade protectionism. The measures adopted by the EU do not contribute to the stability of the global automotive industry supply chain and are not in the interests of any party,” he said., responded Foreign Ministry spokesman Wang Wenbin. Furthermore, being excluded from supply chains will not benefit anyone for China, and for this reason he called on the EU to maintain “the stability of global industrial and supply chains and the China-EU global strategic partnership.”
In short, the channels remain open, but tensions have not abated at all. Regardless of the outcome of the anti-dumping investigation, it will continue to be difficult for the EU to impose tariffs on Chinese vehicles because Beijing has Berlin as an ally on its side. According to Federal Transport Minister Volker Wissing, “there is a risk that a trade war with China could spread beyond the automobile market to other sectors of the European economy and thereby damage the German economy.” If the suspicion that Beijing is supporting Chinese manufacturers with unfair practices is confirmed, Tariffs or other protective measures may be introduced on Chinese cars, but for Wissing this is a “risky” approach. According to the German minister, the isolation policy is leading to a chain reaction. “We have to ensure that we produce our electric vehicles competitively – for Germany and for the global markets. … Today cars are sanctioned, tomorrow chemicals are being sanctioned, and every single step will make the world poorer,” warned Wissing.
EU investigation into Chinese cars begins. But in Europe there is a fifth pillar: Germany
by Claudio Paudice
As is well known, the German position is not altruistic, as the automotive industry benefited more than others from trade with China. But now the wind seems to be changing for the large German houses too. According to a report from the German Economic Institute (IW), German exports to China actually fell by 8% in the first half of the year, while imports fell by 17%. The automobile sector played a crucial role in the decline in the trade balance. German vehicle exports fell by 21 percent and accounted for three quarters of the total export decline. While Germany imported 75% more vehicles from China despite the collapse in overall imports. So far, the large German companies have been able to resist the tough Chinese competition because they have now positioned themselves in the premium vehicle segment, where German reliability does not fear competition from Chinese low-cost suppliers. But in the light vehicle market in particular, there is a risk that the entire EU will fall victim to the advance of Beijing, which has climbed the rankings of vehicle exporting countries in just a few years and is expected to displace Japan from the top spot this year. As research firm Jato Dynamics found, Chinese electric cars cost about 30% less than their European and US counterparts. The average price of an electric vehicle in China was 31,829 euros (US$34,096) in the first half of 2022, compared to 55,821 euros (US$59,797) in Europe and 63,864 euros (US$68,429) in the US. Thanks to the benefits and subsidies guaranteed by Beijing, China, which produced barely 600,000 vehicles in 2000, produced 38 times more last year. The invasion of Chinese cars is now an unstoppable process that has led EU Internal Market Commissioner Thierry Breton to say that Europe “will become a net importer of electric vehicles.”
As recalled in the position paper of the EU Chamber of Commerce in China, the restrictions on cars from foreign manufacturers in China and the restrictions on joint ventures will not be fully lifted until 2022, “however, manufacturers still face regulatory hurdles today to optimize their own Investments in China”, such as difficulties in restructuring existing companies and balancing capital ratios within joint ventures. In addition, investments in automobile production are still partly regulated by non-public documents and internal procedures, and there is still little clarity about requirements and approval processes and in short, European companies complain about the usual lack of transparency. However, the EU’s enormous dependence on the supply of critical raw materials and metals essential for the industrial transformation of its production structure makes European threats hardly credible, which is what Dombrovskis himself has done , to focus on risk reduction, but not on decoupling, that is, decoupling: “The EU has no intention of decoupling from China,” the Commissioner made clear.
On the other hand, how could it be if, as research by the Center for European Policy Studies think tank has shown, for every container the EU sends to China, China exports five to Europe? The over-dependence on Beijing’s companies is massive in many sectors, starting with critical raw materials such as rare earths, batteries, photovoltaic systems, soon also wind turbines and so on. For several months now, President Ursula von der Leyen, also to reaffirm her leadership role in Brussels, has launched various programs to strengthen strategic autonomy by setting ambitious goals, even if in many cases they are unrealistic and unattainable from the start. CEPS notes that China’s importance in global supply chains “is also the main reason companies are so hesitant about decoupling, as it would essentially mean leaving the world’s second-largest economy behind.” A decoupling from China ” would make Europe more dependent on government aid, potentially increasing tensions between countries and delaying not only the EU’s ongoing decarbonization efforts, but also those of the entire world.” This is made clear by the Council’s decision to approve the new standards limiting exhaust emissions of Euro 7 vehicles to be postponed by two years. This represents a setback on the path that will lead to the abandonment of internal combustion engines by 2035. Provided and not admitted that Brussels’ strategies, which have already been controversial in many cases, are not subject to any further postponements.
The agreement in the EU on Euro 7 cars was propagated. But it contains more exceptions than rules
by Angela Mauro
After the departure of Mr Green Deal, Climate Commissioner Franz Timmermans, the father of the ecological transition, in the middle of the ongoing campaign for the 2024 European elections and in the midst of growing – in many ways unfair – industrial competition from China,… The Commission had to heed the demands of managers and companies give in. The competitiveness of Europe’s manufacturing fabric prompted von der Leyen to seek help from former ECB President Mario Draghi, with whom he spoke today to “analyze what Europe can do to maintain its competitive advantage.” This advantage, as the CEPS has always pointed out, is now being jeopardized “by the militarization of trade, particularly by China”, as recently shown by the Chinese export ban on gallium and germanium to the EU, “faster than expected”, in response to the Dutch export ban for semiconductor technology to China”. This shows that Beijing knows how to respond when threatened.