Llong criticized for its naivety when it comes to free trade, the European Union (EU) is finally rebelling. The Brussels Commission said it was ready, Wednesday June 12, to impose a sharp increase in customs duties on imports of electric vehicles manufactured in China. After the European elections, faced with public opinion demanding more protection, this decision breaks with the passivity that was criticized for the EU in its way of approaching globalization.
This turning point is the result of an investigation lasting several months, which highlights the massive public aid from which Chinese manufacturers benefit in order to be able to produce at unbeatable costs. According to Brussels, the subsidies granted by the Chinese government create substantial distortions that the EU wants to compensate for from July with taxes of up to 48%, compared to 10% today.
This survey is useful in more than one way. Firstly, it allows us to deconstruct the narrative that Beijing is trying to impose, according to which China would respect the rules of the World Trade Organization (WTO), unlike the United States, which has openly decided to free from it not only by paralyzing its operation, but also by flouting its principles with the Inflation Reduction Act (IRA), a vast public subsidy program.
Methodically, the Commission demonstrates that, even if one might suspect it, China is in no way the model member of the WTO that it claims to be. From mining to the construction of assembly plants and the financing facilities granted throughout the industrial process, public subsidies are present at every stage. Restoring fair rules is in no way protectionism.
The rest of the world cannot remain passive
Implementing taxes on electric vehicle imports also sends a clear signal to Beijing. Weighed down by the real estate crisis and weak demand, China has increased industrial investments intended for export in recent months to compensate for the slowdown in growth. This orientation risks causing a crisis of overproduction which itself threatens the global macroeconomic balance. The rest of the world cannot remain passive.
Other countries, such as the United States, Turkey, India and Brazil, have already decided unilaterally to impose customs duties on exports of electric vehicles from China. Beijing cries injustice, forgetting to recall that the Chinese market has itself been subject to discriminatory regulations such as the impossibility for a foreign manufacturer to control a local manufacturer.
Even if the EU took the precaution of arguing its criticisms and calibrating taxes according to the level of subsidies granted and cooperation of Chinese manufacturers in the investigation, it is now exposed to retaliatory measures. For the coherence of the Twenty-Seven, this is a moment of truth, because everyone has divergent interests. Germany, which is extremely dependent on trade with China – but also Sweden and Hungary, which already welcome Chinese manufacturers – does not want to quarrel with Beijing.
Member states have until July 15 to decide. Despite the collateral effects that these taxes risk causing, it is essential that the Twenty-Seven remain united. The credibility of the European Commission is at stake, but above all the interests and industrial jobs of the continent.