Politicized protection hurts cooperation

This is an editorial from China Daily.

Slammed by China's Commerce Ministry as a "naked protectionist act" that creates and escalates trade frictions by "destroying fair competition" in the name of "maintaining fair competition", the European Union is imposing anti-subsidy tariffs of up to 38.1 percent on electric vehicles shipped from China from July 4, on top of the 10 percent duties for all imported EVs.

It is how those tariffs have come about and how they will be implemented that belies the European Commission's claim that they are being imposed in the name of fairness.

Rather than being in response to the "threat of economic injury" to EV producers in Europe as a result of the "unfair subsidies" the Chinese automakers enjoy, as it said when announcing the tariffs, "the European Commission is holding high the banner of green development with one hand and wielding the big stick of 'protectionism' with the other hand to politicize and weaponize economic and trade issues", as the Commerce Ministry said in a statement in response to the announcement.

The additional tariff rates vary from one Chinese brand to another, ranging from 17.4 percent on EVs produced by Geely to 38.1 percent on those of SAIC, supposedly depending on the company's cooperativeness with the commission's probe. But many EU automakers have joint ventures in China and policymakers have hinted that special favors might be done to Western carmakers' EVs exported to the EU from China.

That the European Commission chose to make public the tariff move in such a haste, while its policymakers admit many parts of their anti-subsidy probe are still underway, is another indication that the commission views EV imports as a bargaining chip. This was further supported by Valdis Dombrovskis, the EU commissioner for trade, who has said that engagement with the Chinese authorities and stakeholders about potential solutions was ongoing.

It is thought that subject to discussions the final rates will change, if not be scrapped completely, in the final decision, which has to be made by November 2024. Even if they are imposed, the higher tariff rates will not prevent Chinese EVs from entering the EU market, they just mean EU consumers will foot the bill for the commission's power play.

Rather than politicizing Chinese imports in this way, the EU policymakers should look into whether some EU enterprises enjoying even more favorable and supportive policies in China than their Chinese counterparts just choose to price their products at a high level to fatten their profits, while pretending to be a victim of so-called subsidies to their Chinese competitors.

Having threatened to retaliate against the EU with measures against the agricultural or aviation sector, Beijing has pledged to raise duties on cars with engines larger than 2.5 liters in response to the commission's move. Given the limited market share of such automobiles in the Chinese market, it is viewed as being of more symbolic than practical meaning and shows that China does not want the issue to become unduly disruptive of the broader bilateral relations with the EU. That being said, no party will benefit from the EU move, and the great lengths the EU policymakers have gone to in a bid to make the tariffs seem a result of transparency and procedural justice only serve to highlight their coercive intent.

As the Chinese EV maker Nio said in a statement, the commission's move hinders rather than promotes global environmental protection, emissions reduction and sustainable development, all of which the EU is trying to claim leadership in. Chinese EVs are widely viewed as being a key support for the realization of the EU's goal of cutting greenhouse gas emissions by 55 percent by 2030 compared to its 1990 level. So the commission is hindering the EU's attempt to race to the front in the green transition by shooting the EU in the foot.

How things develop will depend on how the EU follows up on the announcement, as Beijing will take all necessary measures to firmly defend the legitimate rights and interests of Chinese companies.