On October 4th, the European Commission announced that the proposal to impose tariffs on electric vehicles imported from China has won the necessary support from member states. The proposal claims that China’s cheap electric vehicles "flood" the European market and pose a threat to the European electric vehicle industry. According to relevant EU rules, the proposal will only be shelved if the population of the country opposing the proposal exceeds 65% of the EU population. Although the European side expressed its sincerity to resolve this trade dispute through negotiations, the adoption of this proposal undoubtedly pushed the economic and trade relations between China and Europe to a dangerous position.

A spokesman for China’s Ministry of Commerce said on the 12th that China’s attitude and sincerity in seeking a solution through dialogue and consultation have not changed, and it has formally invited the European side to send a technical team to China as soon as possible to continue the next stage of face-to-face consultation. It is hoped that the European side can move in the same direction as China, arrange to come to China as soon as possible, accelerate the consultation with a constructive attitude, and strive to reach a proper solution at an early date.

The EU insists that the so-called "overcapacity" and "government subsidies" give China’s electric vehicle industry an unfair competitive advantage in international trade, which lacks the most basic international economic and trade knowledge. As far as the general rules of international economy and trade are concerned, there is no inevitable connection between the production capacity and foreign trade in the economic sense. In social production, whether the production capacity meets the market expectation is always the result of dynamic game. As far as specific industries are concerned, there is no necessary connection between the competitive advantage of products and the capacity. How can the EU, which knows well the rules of world trade, not know this basic knowledge of international trade? In fact, there is indeed disagreement within the EU on this statement. Relevant reports point out that the global electric vehicle market will maintain strong growth in the next decade, and Europe’s own electric vehicle industry is far from meeting the needs of its internal market, and many electric vehicle parts still need to be imported. The so-called "overcapacity" is really a very unwise excuse.

Secondly, it is not a "new idea" to say that China’s electric vehicle industry is "subsidized by the government" to gain an unfair competitive advantage. The fundamental question is, does a moderate government support policy mean "unfair competition"? If this conclusion holds, then the dominant industries in almost all countries should be put on this hat, because from the dual dimensions of history and reality, the encouragement and support of the government is the common law for the development of emerging industries in modern countries. In fact, the government of China cancelled the subsidy policy for the purchase of new energy vehicles at the end of 2022, and the competitive advantage of China’s electric vehicle industry depends more on the independent innovation ability of enterprises. What Europe can’t talk about is that developed countries in Europe took a lot of subsidies to the electric vehicle industry in the early days. Germany’s subsidies to electric vehicles were among the best in the world, and it also provided various forms of financial support and tax relief for domestic car companies. Therefore, by attacking China’s "government subsidies" to cover up the backward technology of European domestic electric vehicle industry, it has completely exposed Europe’s inefficient social organization management ability and the principle of double standards in international trade.

Europe’s imposition of tariffs on China’s electric vehicles will not only protect its auto industry as it claims, but will further damage its international competitiveness. Imposing tariffs will first lead to an increase in the price of electric vehicles, which will directly affect the popularity of electric vehicles in Europe, and the shrinking demand side will lead to a decline in the vitality of the entire European automobile market. European automobile industry is likely to fall into a vicious circle of insufficient product innovation and weakened market demand. Secondly, European automakers are already facing the challenge of transformation. Adding tariffs will lead to the increase in the cost of imported auto parts, which will seriously hinder the cooperation between China and Europe in the field of high-end manufacturing technology, and the scale of China’s investment in Europe will also be greatly affected. This man-made supply chain crisis will eventually lead to the loss of technological innovation opportunities in Europe, and its industrial transformation and upgrading goals will also be doomed to fail.

More importantly, sacrificing the trade chain of China-EU electric vehicle industry will further aggravate the division within the EU. In this voting, the vast majority of EU member states are not in favor of solving the trade disputes between China and Europe in this field by imposing tariffs, while Spain, Germany, Hungary and other countries have clearly expressed their opposition. It remains to be seen whether this proposal will trigger a fundamental crisis of economic integration within the EU at a broader political level. However, there are very distinct fundamental differences within the European automobile industry. The European Automobile Manufacturers’ Federation appeals not to undermine the current bilateral cooperation between China and Europe and hinder the pace of the transformation of the European automobile industry. BMW, Mercedes-Benz and other large car companies are deeply aware of the importance of the China market to their global layout, and explicitly oppose this move that seriously threatens their interests in China. Technology and investment from China are very important to the green transformation of European automobile industry, which is the basic consensus of European automobile industry.

In essence, the EU’s protectionist policy of imposing tariffs is a typical self-restraint. Facing the development status of European automobile industry, only by actively participating in international competition and cooperation with an open attitude can we promote the flow of technology, capital and other production factors, ultimately promote the transformation and sustainable development of European automobile industry, and maintain and further expand its global competitiveness. As German Chancellor Angela Scholz said in an interview, "We hope to sell our cars in Europe, North America, Japan, China, Africa, South America … all over the world. But this means that we must also be willing to buy cars from other countries. " The European Union will not hesitate to impose tariffs to maintain the industrial development in this region. This economic policy that harms others and does not benefit itself will fundamentally stifle the development prospects of its automobile industry in the next few decades.

Text: Gao Jian (Director, British Studies Center, Shanghai International Studies University) Fu Borui (Assistant Research Fellow, British Studies Center, Shanghai International Studies University)