By Jorge Liboreiro
The stage has been set in Brussels for a decision that could either declare the triumph or write the obituary of Ursula von der Leyen’s China policy.
The 27 countries of the European Union have been called to vote on a proposal to slap additional tariffs on imports of China-made electric vehicles (EVs). The closely watched ballot, scheduled for Friday morning, represents the culmination of a months-long investigation first announced by von der Leyen in September last year.
“Global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies. This is distorting our market,” the Commission president told MEPs back then. “As we do not accept this from the inside, we do not accept this from the outside.”
After dozens of visits across China, the probe concluded with overwhelming findings: Beijing had for years lavished its domestic EV sector with enormous sums of public money, permeating “the entire supply chain,” as officials described it. Subsidies were detected from the mining of raw materials to the shipping of finished goods, creating an all-encompassing environment where preferential lending, tax reductions, direct grants and misleading green bonds worked together to the benefit of carmakers.
As a result of this financial overflow, the Commission concluded that European firms risked being pushed out of the lucrative EV market and suffering unsustainable losses, with painful consequences for 2.5 million direct and 10.3 million indirect jobs in the bloc.
The dismal outlook led Brussels to propose additional tariffs in a bid to offset the damaging effect of the subsidies and close the price gap between China and the EU. The proposed duties, which will come on top of the existing 10% rates, vary according to brand and level of cooperation with the Commission’s probe, including Tesla (7.8%), BYD (17%), Geely (18.8%) and SAIC (35.3%).
Friday’s vote will see member states vote on a legal text to make these extra duties applicable for the next five years. The vote will follow the rules of qualified majority, meaning it will take 15 countries representing at least 65% of the bloc’s population to approve the proposal. The same threshold will be needed to reject it, which will trigger the appeal process and a second vote at a later stage.
There is, however, an increasingly third possibility: some member states could abstain, preventing the room from reaching the necessary number for a positive or negative outcome. It will then be up to the Commission, invoking its exclusive trade powers, to break the impasse and decide if it wants to go ahead with the tariffs. At any rate, the final decision must be taken by 30 October.
For the Commission president, who has been credited with spearheading a major shift in how the EU sees and deals with China, the stakes couldn’t be any higher.
Von der Leyen has described China as a nation “more repressive at home and more assertive abroad,” bent on achieving a “systematic change of the international order” with Beijing at its centre. In her view, unfair trade practices, such as massive injections of industrial subsidies to conquer market share and control nascent technology, are another tool to ensure the Communist Party succeeds in its long-term mission.
This hard-boiled vision was the fuel that prompted a raft of inquiries into Chinese products and subsidies. Among them, the probe into EVs stood out as the most consequential and explosive of its kind due to its political and economic implications – not to mention its potential to unleash a trade war. The vote on the tariffs is, by extension, a referendum on von der Leyen’s China policy.
Remarkably, it’s her home country, Germany, who has worked the hardest to derail the president’s gran plans.
Germany, an industrial powerhouse with a world-class automotive sector and deep commercial ties with the Chinese market, has traditionally advocated for a conciliatory policy towards Beijing, putting the economy first and politics, second.
The arrival of the Greens, with their outspoken views on China's totalitarian regime, to the governing coalition was seen as the promising dawn of a new era. But growing fears of commercial retaliation, relentless pressure from car-makers, persistently high energy prices and stagnant GDP growth eventually dampened the German resolve to stand up to China, leading to a behind-the-scenes push to kill the tariffs.
“Of course, we have to protect our economy from unfair trade practices,” Chancellor Olaf Scholz said this week. “However, our reaction as the EU must not lead to us damaging ourselves,” he added, calling for EU-China negotiations to continue. (They will, at least for now.)
For the most part, Berlin’s crusade has fallen flat. France and Italy, two countries that given their demographic weight will be much needed to stop the duties, have shrugged it off and stood by the Commission’s side. Poland and the Netherlands, two other key actors, have chosen to go harder, rather than softer, on China. The lessons learned from Russia's invasion of Ukraine have stirred similar emotions across the bloc.
The fact the campaign “appears doomed to fail” demonstrates that “Germany’s sway over China policy has been greatly diminished,” Noah Barkin, a visiting senior fellow at the German Marshall Fund, wrote ahead of the crucial vote.
“The last time a German chancellor ignored the concerns of the country’s closest European allies, the European Commission and the United States out of blind fealty to German industry, it ended with a strategic catastrophe: the Nord Stream pipelines.” |
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