Beijing has filed a WTO complaint over new EU taxes on Chinese electric cars

On Wednesday, Beijing said it had filed a complaint with world Organization of trade due to the European Union’s decision to impose high tariffs on Chinese electric vehicles.

The additional taxes of up to 35 percent were announced on Tuesday after an EU investigation found that Chinese state subsidies are undermining European carmakers, but the move has faced opposition from Germany and Hungary, which fear angering Beijing and starting a bitter trade war.

China criticized Brussels’ decision on Wednesday morning, saying it did not “agree and disagree” with the tariffs and filed a complaint under the World Trade Organization’s (WTO) dispute settlement mechanism.

“China… will take all necessary measures to firmly protect the legitimate rights and interests of Chinese companies,” Beijing’s Ministry of Commerce said.

EU trade chief Valdis Dombrovskis said on Tuesday that “by adopting these proportionate and targeted measures after a thorough investigation, we are standing up for fair market practices and the European industrial base”.

“We welcome competition, including in the electric vehicle sector, but it must be underpinned by fairness and a level playing field,” he said.

But Germany’s main auto industry association warned the tariffs raised the risk of a “broad trade conflict”, while a Chinese trade group criticized the “politically motivated” decision, although it called for dialogue between the two sides.

Tariffs will rise to the current 10 percent on electric car imports from China.

The decision became law after it was published in the EU’s official journal on Tuesday, and the tariffs will take effect on Wednesday.

After that, the tariffs will become final and will be valid for five years.

Additional duties are also applied at different rates to vehicles made in China by foreign groups such as Tesla, which is subject to a 7.8 percent duty.

Chinese auto giant Geely — one of the country’s biggest sellers of electric cars — faces an additional duty of 18.8 percent, while SAIC will be hit with the highest rate of 35.3 percent.

Sick companies

The tariffs do not have the support of a majority of the EU’s 27 member states, but in a vote earlier this month there was not enough opposition to block them, which would have required at least 15 states representing 65 percent of the bloc’s population.

The EU launched the investigation in an attempt to protect its car industry, which employs around 14 million people.

France, which had pushed for an investigation, welcomed the decision.

“The European Union is taking an important decision to protect and defend our trade interests at a time when our automotive industry needs our support more than ever,” said French Finance Minister Antoine Armand.

But Europe’s biggest carmakers, including German auto titan Volkswagen, criticized the EU’s approach and called on Brussels to resolve the issue through negotiations.

The additional tariffs are “a step back for free world trade and thus for prosperity, job retention and growth in Europe,” Hildegard Müller, president of the German Association of the Automotive Industry, said on Tuesday after the announcement.

Volkswagen, which has been hit hard by growing competition in China, has previously said the tariffs would not make the European auto industry more competitive.

The warning came weeks before the giant announced on Monday plans to close at least three plants in Germany and lay off tens of thousands workplaces.

Go back

Negotiations are ongoing between the EU and China, and the tariffs could be lifted if they reach a satisfactory agreement, but officials from both sides have pointed to differences.

Discussions have centered on minimum prices that would replace tariffs and force automakers in China to sell vehicles at a certain price to offset subsidies.

“We remain open to a possible alternative solution that would be effective in addressing the identified issues and compatible with the WTO,” Dombrovskis said.

China’s Chamber of Commerce and Industry in the EU called on Brussels and Beijing to “accelerate negotiations on setting minimum prices and ultimately abolish these tariffs.”

The EU may now face Chinese retaliation, as Beijing has already announced on October 8 that it will impose temporary tariffs on the European brand.

Beijing has also launched an investigation into EU subsidies on some dairy products and pork imported into China.

Trade tensions between China and the EU are not limited to electric cars, with Brussels also investigating Chinese subsidies for solar panels and wind turbines.

The EU is not alone in imposing high tariffs on Chinese electric vehicles.

Canada and the United States have in recent months imposed much higher 100 percent tariffs on imports of Chinese electric vehicles.

Source: AFP