The member states’ vote on whether to impose definitive tariffs on Chinese-made electric cars on Friday morning (4 October) showed that EU countries are split down the middle on the issue – with 10 backing the measures, five voting against and 12 abstaining.
What this means is that while the lack of a qualifying blocking majority allowed the European Commission to declare that it had “obtained the necessary support” from EU countries, the backdrop for supporting the tariffs is deeply blurred and far from set in stone.
If anything, the outcome of the vote – with Germany switching from abstention to rejection in a last-minute twist by Chancellor Olaf Scholz’s coalition government – means there will be even more pressure on the EU executive in the 26 days before the final verdict.
German stakeholders – who are most affected given the country’s close economic ties with the Chinese – were quick to remind the Commission of the stakes in its negotiations with Chinese counterparts.
BDI, Germany’s powerful industry lobby, triggered the flurry of reactions by warning that „the decision on countervailing duties in the market for electric cars must under no circumstances mean the end of the discussions” – throwing in a slight dig at the Commission for the way it conducted its original investigation into carmakers.
“Close coordination with the European economy is essential,” the association said, adding that it had “demanded” the Commission to “involve affected European companies in investigations earlier and more closely than was the case in the case of electric cars.”
Notably, however, the group conceded that the picture for EU-China relations is particularly complex, especially as “close economic ties to China’s party-state-controlled hybrid economy are associated with economic and geopolitical risks.”
“More and more countries are resisting market distortions by the Chinese state,” said BDI, pointing out that “the North American market in particular” is becoming increasingly closed off to Chinese imports.
This, however, has made “access to the EU market […] of central importance for China’s export industry” – providing a solid window of opportunity for Europe to engage in strategic economic ties with the country, it said.
Meanwhile, the German car association VDA openly hailed the German government’s change of heart – influenced in no small part by the group’s own staunch lobbying efforts – and praised Scholz and the liberal FDP ministers for “prioritising the foundation for growth and prosperity”, which it said represented global demand for its exports.
Achim Post, deputy chair of the Socialist SPD party in the German Bundestag, confirmed after the vote that the shift to a stronger country stance was “at the instigation of Chancellor Scholz”. “In these economically challenging times, tariffs against China harbour a high risk, especially for industry in our country,” he added.
“We must now use the remaining time until the tariffs are introduced with all our might to reach an agreement with China after all. The EU Commission is still called upon to do this,” Post added.
Michael Link, vice chair of the FDP parliamentary group, said the Germans had adopted the right “realpolitik approach” to a key crucial trade issue.
“Of course, our industry should wisely become significantly less dependent on the Chinese market, as China is taking an increasingly aggressive stance on foreign and trade policy and is arbitrarily restricting the room for manoeuvre of foreign investors,” he added.
“However […] reducing our risky dependencies on the Chinese market will not happen overnight,” Link said. “Precisely because of our high exposure to the Chinese market […] it would be better to negotiate hard with China, diversify our economic policy and reduce security risks instead of entering into an open trade conflict.”
But the (newly redacted) harmonious messaging from SPD and FDP opened up fresh internal fractures in the governing coalition and angered the third ruling party, the Greens, whose speaker for economic affairs, Sandra Detzer, condemned Scholz’s orders.
“The Chancellor’s vote is counterproductive. Europe must represent its interests as one,” Detzer told Euractiv after the vote. “That is difficult when the German Chancellor is travelling solo.”
She also doubled down on her support for a tougher trade stance from the Commission, reiterating the urgency of imposing definitive measures on Chinese imports: “They are not protectionism, but a measure against distortions of competition through subsidies. With today’s decision, the EU is taking a new approach in its dealings with China – this is urgently needed.”
“The EU wants to enforce nothing else with its tariffs within the framework of the WTO agreements,” said Detzer, warning that “German car manufacturers should not resist the enforcement of WTO rules either.”
Stuck between a rock and a hard place, the EU executive signalled on Friday morning that talks with China are far from over: “The EU and China continue to work hard to explore an alternative solution that would have to be fully WTO-compatible, adequate in addressing the injurious subsidization established by the Commission’s investigation.”
However, with its final decision due on 30 October, the least desirable outcome would be a repeat of the German government’s last-minute scrambling and split positions.
Additional reporting by Jonathan Packroff
[Edited by Daniel Eck]
Economic News Roundup
Member states fail to block the European Commission’s proposed tariffs on China-made electric vehicles, paving the way for duties to finally be imposed by the end of this month. The vote on Friday (4 October) means that the Commission will be able to introduce tariffs of up to 35.3% on Chinese automakers, including BYD, Geely, and SAIC. The duties will come on top of the EU’s standard 10% car levy and must be imposed by 30 October as a matter of law unless a negotiation solution is reached, according to the European Commission. Ten EU countries voted in favour of the duties and only five voted against, while 12 member states abstained. A 'qualified majority’ of 15 member states, representing 65% of the EU’s population, was needed to prevent the duties from being imposed for a five-year period. Read more.
French President Emmanuel Macron warned in Berlin on Wednesday (2 October) that EU economic thinking must change urgently, or the Union risks being „out in three, four years” against US and Chinese competition. The EU’s approach to economic growth and international trade is no longer fit for purpose, Macron said in a fireside conversation at the Berlin Global Dialogue, adding the EU risks becoming an irrelevant player in international markets and a mere “adjustment zone for over-capacities” in both China and the US. “If we continue with our [old] growth model, we’re out in three, four years,” the French head of state said. Read more.
France will take unprecedented action to lower its public deficit for 2025, with the new Barnier government’s advisors announcing plans on Wednesday (2 October) to save €40 billion and potentially earn an additional €20 billion in revenues. Prime Minister Michel Barner presented his government’s plans in a general policy speech before French MPs on Tuesday, and a day later, officials outlined the new €60 billion budget measure. Barnier said the aim was to „bring the deficit down to 5% of GDP in 2025” from around 6% in 2024 and then „return below the 3% cap in 2029, in line with European commitments,” referring to the 'excessive deficit procedure’ the European Commission had threatened to trigger on the country’s finances in July. Read more.
At a debate on Tuesday (1 October), former Italian Prime Minister Enrico Letta said his vision of a pan-European high-speed rail network will only be realised if Europe delivers on its dream of a single market for investment and savings. „We support railways, but if we cannot say something clear on how to finance it, it will remain [only] a very good expression of goodwill,” Letta said at Tuesday’s debate, organised by the railway industry body CER and the Jacques Delors Institute. On rail, his report advocates for creating a pan-European high-speed rail network and enhanced connectivity between rail systems across Europe. At the event, Letta spoke of a new „momentum” behind European rail expansion and argued that this was, in part, a result of his report. Read more.
Michel Barnier set out a series of policy priorities spanning spending cuts, immigration, health and more in a wide-ranging speech on Tuesday (1 October), with nudges and nods to Brussels that France was back under control. Barnier’s ‘discours de politique générale’ – a speech Prime ministers read out to Parliament when a new government is in place, laying policy priorities during their tenure – was more anticipated than ever, as the country navigates a looming budget crisis and the parliamentary arithmetic means the far-right holds the key to Barnier’s government’s survival. Read more.
Berlin’s clean industry wish-list: Kick nuclear out of EU financing. Laying out key priorities for the EU’s upcoming Clean Industrial Deal, German Economy State Secretary Sven Giegold said on Monday (30 September) he wants the Commission to prioritise renewable energy, taking a tough line on nuclear power and France’s renewable targets. “It is important to exclude nuclear energy and its production from all EU funding,” the German politician, who is reported to run for a leadership position in the German Green party, said. Read more.
The United States’ ownership of European citizens’ banking data and its dominance of global payment systems means that the European Union is increasingly becoming a “financial colony” of the US, according to former Italian prime minister Enrico Letta. The Italian technocrat, whose recent report on the single market is expected to heavily influence the EU policies in the next mandate, also warned that member states’ refusal to relinquish control over their domestic banking sectors risks exacerbating Europe’s financial subservience vis-à-vis the US. “I think we are becoming more and more a colony in financial terms,” Letta told an event hosted by Bruegel, a Brussels-based EU policy think-tank, on Wednesday (2 October). “What for me is strange is that in all the different [EU] countries, there’s a race to raise our national flag. [But this is akin to] raising our own flag as colonies.” Read more.
The regular issuance of common EU debt along the lines of the bloc’s €806.9 billion pandemic recovery fund is not “essential” for Europe to remain competitive with China and the US, says Mario Draghi. In comments that appeared aimed at easing the concerns of fiscally hawkish member states, the Italian technocrat on Monday (30 September) expressed dismay that much of the discussion surrounding his recent report on the EU economy has centred on his proposal for a successor to the so-called NextGenerationEU (NextGenEU) programme. “This [call for a successor to NextGenEU] was the very first thing people reacted to in the whole report,” Draghi said at another event hosted by Bruegel. “I have to say, as much as I love this concept, it is not the main thing in the report… There are many good reasons for having it, [but] it is not an essential ingredient.” Read more.
