Germany’s Scholz, Habeck pin their hopes on EU-China talks to avoid trade war

German Chancellor Olaf Scholz voiced hope on Monday (24 June) that EU and Chinese negotiators will reach a deal on electric vehicle (EV) tariffs before 4 July – the day European duties on Chinese carmakers are meant to come into effect.

The European Commission announced on 12 June the EU will impose additional tariffs of 17.4% to 38.1% on electric cars produced in China, prompting threats of retaliation from Bejing.

A Commission spokesperson confirmed to Euractiv that the EU executive’s Vice President Valdis Dombrovskis and Chinese Commerce Minister Wang Wentao spoke on the phone on Saturday to kick off trade negotiations, in the hope of reaching a deal that would pre-empt the activation of additional tariffs.

“The two sides agreed to engage on the basis of facts and in full respect of WTO rules,” Commission spokesperson Olof Gill told Euractiv. 

“The EU side emphasised that any negotiated outcome to its investigation must be effective in addressing the injurious subsidisation,” he said, adding that “the two sides will continue to engage at all levels in the coming weeks”. 

The Commission unveiled preliminary tariffs on Chinese EVs based on the results of its nine-month investigation into the levels of state subsidies received by different Chinese or China-based carmakers, which it believed resulted in hefty distortions in the European market.

Speaking at an event organised by German industry umbrella group BDI on Monday (24 June), Scholz welcomed the announcement of the two sides having initiated talks.

“Of course, we need to protect our industry from unfair trade practices, ideally with mutually agreed solutions,” Scholz said.  

“That’s why it is good that the Commission is offering the Chinese side further talks in the ongoing anti-subsidy proceedings,” he said, adding that he had been “very insistent on this and have also discussed it very carefully with the Commission president”.  

“There is still a little time left until 4 July,” he said – referring to the timeline the EU executive laid out earlier in June. “However, it is clear that we also need serious movement and progress from the Chinese side at this point.”  

On 4 July, the preliminary tariffs will start to apply, meaning that companies need to put aside a certain sum for the tariffs. The final decision on tariffs is, however, only expected by November. 

Habeck: What’s really at stake beyond EVs

Reports of Saturday’s phone conversations between the two blocs came as German Economy Minister Robert Habeck (Greens) was on an official trip to China, where he also met with Wang, according to German media. 

Speaking after Scholz at the BDI conference on Monday, Habeck said the dispute on EVs shows what is “at stake” more generally in international trade relations.

The issue highlights “how important it is to […] not get caught up in a spiral of ‘I won’t give you anything’ – because in the end, everyone will lose because of this,” he said.

“The Chinese side firmly believes – they don’t just say it, they firmly believe – that the European Union, the West, in a form of prolongation of imperial posture, does not want successful Chinese goods to enter our market,” Habeck said.

“It really takes a lot of effort to say: That’s not the point.”

Conversely, he argued, EU counterparts tend to believe that China does not “want to bring better products to our market, but rather deliberately destroy our market and thus our prosperity and our industries with dumping offers,” he said.

These mutually prejudiced views could lead to a lack of understanding between the two blocs, he said.

“That’s why travelling and direct talks make a difference.”

In an interview with broadcaster ARD on Saturday, Habeck had called the announcement of talks a “good first step”, adding that “this was not possible in the days and weeks before”. 

While the European Commission stressed the willingness to negotiate a deal already when announcing the preliminary tariffs, communication with the Chinese side had mainly happened “via the press” since then, Habeck said.

“Now there is a concrete timetable for initial negotiations.”  

Germany had been particularly keen on negotiating a deal from the outset, as it fears that potential retaliatory measures by the Chinese side could hit its export-dominated industry. 

BDI president Siegfried Russwurm said that “as long as we don’t get into an escalation that comes close to a trade war between now and 4 July and thereafter, something would already have been gained”. 

[Edited by Anna Brunetti/Zoran Radosavljevic]

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