EU tariffs on China too low to protect Europe’s car industry – former top US trade official

3 months ago 13

Provisional tariffs on China-made electric vehicles (EV) announced by the European Commission on Wednesday (12 June) are too low to protect Europe’s automobile industry from Beijing’s state-subsidised car exports, a former top US trade official told Euractiv.

Former General Counsel of the Office of the United States Trade Representative (USTR) Greta Peisch said the duties, which range from 17.4% to 38.1% and go on top of the existing 10% tariff – are insufficient to “counteract” the hefty levels of state support Chinese EV manufacturers typically receive at all levels of the production process.

She also noted that, with some EV models selling for just $12,000 in China, levies as high as 100% would likely not be “prohibitive” enough to re-balance the EU-China trade relationship or sufficiently suppress European demand.

“[The tariffs] just don’t add up to enough to counteract all of those forces that you see,” Peisch said. “I think you could anticipate that those vehicles could continue coming in and being sold at essentially the same price today and continuing to take market share away from the European brand producers in the EU.”

“I think [the tariffs are] a good first step, but I [am] cautiously sceptical that it is going to be enough in the long term to ensure that [Europe’s] industry remains as strong as it is today.”

Peisch, who was involved in developing the far more stringent trade measures the US imposed on China last month—which included 100% EV tariffs —explained that, in the US case, levies in the 10-30% range invariably fail to have any significant impact on imports from China.

“It just doesn’t move the needle on products,” she said. “But when you impose something on the order of 100%, or even 150%, or 200%, then you do actually see an impact [on] the flow of the imports coming in and the price producers are facing.”

Peisch, who stepped down from her position at the USTR in January and currently works for Wiley, a DC-based law firm, also emphasised that the US has a geostrategic interest in ensuring that its transatlantic partner retains its core industrial capacity.

“I think it’s important for the US that EU producers in the EU market, even though we’re fierce competitors, are successful and vibrant,” she said.

Contacted by Euractiv, the US Government expressed significantly more optimism about the Commission’s decision.

“We welcome action by our trading partners to push back on China’s non-market excess capacity that is harming workers and businesses around the world,” a USTR spokesperson said.

“The United States has been consistently raising concerns with China’s unfair non-market policies, including for EVs, steel, solar, and other sectors,” they said.

European experts concur

Leading European analysts echoed Peisch’s analysis that the announced tariffs were too low to have a significant adverse effect on Chinese exporters.

Alicia García-Herrero, chief economist for Asia Pacific at French investment bank Natixis and senior fellow at Brussels-based think-tank Bruegel, noted at a panel on Thursday that the tariffs were not only too low but also came “too late” – namely, after Brazil and Turkey, as well as the US, had imposed similar measures.

“[The view that] I may as well impose tariffs since everybody else is doing so…That’s not a strategy. That’s just alignment,” she said.

García-Herrero added that, with EU’s tariffs still markedly lower than their US equivalent, Europe will remain an attractive destination for Chinese EV exporters – even when the provisional measures become permanent when the EU executive reaches a final decision over the forthcoming months.

“It’s still a market where [Chinese vehicles] can enter because the relative tariff is low,” she said. “So, for me, the tariffs are inconclusive in terms of impact.”

Other analysts noted that the new tariffs suggest that the EU might be moving closer towards adopting the US’s notably more aggressive trade policy on China.

Sander Tordoir, chief economist at the Centre for European Reform, said that although the EU remains more inclined than the US to follow a rule-based approach, a general “alignment” between Brussels’ and Washington’s trade policies appears to be taking place.

“I do think generally this EV investigation is the start sign for more alignment of the EU with the US,” Tordoir told Euractiv.

Tordoir also argued that, ultimately, China is to blame for the growing conformity between the EU and US positions.

“Fundamentally [the EU-US alignment] is driven, in my view, by China’s actions, which is their unwillingness to address overproduction and their unwillingness to scale back on all the subsidies and protectionism,” he said.

“So China’s actions are driving the Europeans a step closer to the US.”

[Edited by Anna Brunetti/Alice Taylor]