EU Says ‘Significant’ Gaps Remain With China in EV Tariff Negotiations

The European Union's trade chief, Valdis Dombrovskis, delivers a press conference in Lulea, northern Sweden, on May 31, 2023. Jonas Ekstromer/ TT News Agency/AFP via Getty Images

The European Union said on Oct. 25 that there are still “significant remaining gaps” in negotiations aimed at avoiding high tariffs on electric vehicles (EVs) made in China, which are due to take effect next week.

The EU’s trade chief, Valdis Dombrovskis, held a virtual meeting with his Chinese counterpart, Wang Wentao, on Oct. 25, as part of the ongoing discussion to address Brussels’s concerns over subsidized EVs imported from China, according to the European Commission.

“The principals took stock of the progress made during eight technical negotiating rounds, as well as significant remaining gaps,” a readout of the video call states. They “agreed that further technical negotiations would take place shortly.”

The European Commission is nearing the conclusion of an investigation into Chinese EVs launched by Commission President Ursula von der Leyen a year ago. Preliminary findings released in June have revealed that automakers in China benefit from unfair state subsidies, threatening to hurt the EU’s homegrown auto business. As a result, Brussels has proposed to impose tariffs of up to 36.6 percent—on top of the current 10 percent—on EVs made in China, saying the step is necessary to level the playing field.

In a bid to avoid the duties, China has proposed to set minimum prices for its EV imports, a mechanism known as price undertaking. The European Commission said last month that it’s open to negotiations but emphasized that any minimum price offer should align with World Trade Organization (WTO) rules and offset the injuries caused by Beijing’s state subsidies.

However, earlier this month, Beijing warned the EU against consulting separately with individual carmakers, saying that EV manufacturers have authorized the industrial group—the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME)—to present price commitment plans that reflect the industry’s collective stance.

“If the European side conducts separate price commitment consultations with some companies while negotiating with China, it will shake the foundation and mutual trust of the negotiations,” China’s commerce ministry said in a statement on Oct. 12.

During the Oct. 25 video conference, Dombrovskis emphasized that, per the WTO rules, “the possibility to offer price undertakings is open to the different companies participating in [the] investigation,” according to the readout. He told Wang that the European Commission’s negotiations with the CCCME “do not exclude discussions with individual exporters,” according to the readout.

If no consensus is reached, the new duties on Chinese EVs will kick in on Oct. 31.

Beijing has repeatedly protested against this move and responded with a series of anti-dumping investigations against various imported products from the bloc, including brandy, pork, and dairy.

Following the EU’s vote to hike duties on Chinese EVs for the next five years, China’s commerce ministry announced provisional measures targeting EU brandy imports, with French cognac being the main target. The EU has said it would challenge China’s decision at the WTO, pledging to confront “any unfair use of trade defense instruments” against its economy with “utmost seriousness.”

Brussels has ramped up efforts to push back against Beijing’s unfair trade policies. According to the European Commission’s chief trade enforcer, Denis Redonnet, 75 percent of trade investigations initiated last year targeted imports from China.

“That is not a surprise, given the distortions we see there,” Redonnet told the European Parliament’s trade committee on Oct. 14.

Amid growing pressure from Brussels, Janka Oertel, a senior policy fellow at the European Council on Foreign Relations, a Berlin-based think tank, sees the Chinese regime at a crossroads, but neither path appears promising.

“[Beijing] could start a full-on trade war—by increasing tariffs on European imports or by restricting exports of critical goods to select European countries—and see whether this can force member states to oppose Brussels’s plans of further measures. Alternatively, it could embed itself deeper in Europe’s industrial ecosystem, seek compromise, and adhere to data localisation, local content, and financial transparency requirements,” Oertel said in an Oct. 25 report.

“The latter is politically unlikely, while the former may be too costly given China’s tottering economy—if member states back Brussels and call Beijing’s bluff.”