Bound by rules economics EU trails US on China tariffs imposition

The more modest action stems from the EU’s strong belief that trade should be based on international rules and its awareness that it has more to lose from a trade war with China.

 

Tougher EU

 

Certainly, the EU has intensified its scrutiny of Chinese business over the past 12 months.

 

The bloc appears to have learned a lesson from an investigation into Chinese solar panels a decade ago, when it did not impose tariffs and the EU’s own industry collapsed.

 

Its anti-subsidy investigation into Chinese EVs is its highest-profile case in years. It is also the first instance of the Commission starting a new case on its own initiative, rather than following up an EU industry’s complaint.

 

The Commission has launched a series of investigations under its Foreign Subsidies Regulation, which is designed to curb foreign companies that operate within the bloc and receive distortive subsidies. China has been the clear focus.

 

The EU executive has also updated its report on state-led distortions in the Chinese economy. It opens the door to complaints from EU chip or clean-tech producers, adding potential cases to those from traditional sectors such as steel or ceramics. There is no similar report for any other country.

 

The European Union increasingly views China as a strategic rival. At the end of 2023, its diplomatic service said Beijing was becoming more repressive at home and assertive abroad, resorting to economic coercion or export controls on critical minerals. China’s support of Russia after the invasion of Ukraine has heightened concerns.

 

De-risking, or reducing reliance on China, is now the EU’s mantra.

 

EU: Rule-bound, China-bound

 

Aslak Berg, research fellow at the Centre for European Reform, said the European Union was moving towards the US

position, but not to the same extent and that it was still using its traditional tools.

 

“It’s more politically sensitive, but it’s not legally different from cases of steel tariffs,” he said, referring to Wednesday’s action on EVs.

 

The EU case solely concerns subsidies, while in justifying the US measures, Biden also highlighted threats of Chinese technology transfer and cyber espionage.

 

The EU insists it is committed to rules-based international trade and that its investigation and tariffs are compatible with World Trade Organization rules. The US has said WTO rules fail to address Chinese “non-market” practices.

 

“The EU is still acting in the same framework as pre-Trump.

 

With China, the US has freed itself from restraints of the WTO and is acting according to domestic policy,” Berg said.

The EU’s more cautious stance reflects its economic ties to China.

 

Last year, U.S-China goods trade totalled $573 billion, with US exports of $148 billion. For EU-China, goods trade was 739 billion euros ($798 billion), with EU exports of 223 billion euros ($241 billion).

 

German car producers, which export some 30 per cent of their models to China, have been most critical of the tariffs.

 

“For the EU, it is not reasonable to copy what the US is doing,” said Poitiers.

 

First Published: Jun 14 2024 | 10:59 AM IST