In addition to imposing taxes on electric vehicles, what else does the EU have in its protectionist toolbox against China?
2024-08-25
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Recently, the European Commission disclosed to relevant parties the draft decision on the final anti-subsidy tariffs on pure electric vehicles imported from China. Although the draft made a slight adjustment to the proposed tax rate, it still maintained a high tax rate. The draft will be voted on in the European Council before November 4 this year. This is another key step after the EU launched an anti-subsidy investigation on Chinese electric vehicle exports to Europe. Considering that it is taking a "de-risking" policy towards China at the macro level and launching relevant investigations in other industries such as photovoltaics, it can be seen that the EU's economic and trade policies towards China have an increasingly strong protectionist color.
In the long run, the EU's protectionist measures against China will not be limited to conventional anti-subsidy, anti-dumping and other measures based on market competition factors, but will respond to China in a protectionist manner from a broader perspective, and may even adopt more deterrent policy tools more widely for the purpose of deliberately suppressing China's product and industrial advantages. These include policy measures based on "safety, carbon emissions and human rights" standards.
For my country, the way to break the EU's existing and potential protectionist measures against China is to adopt a more open policy toward Europe and more proactive trade and investment actions, so as to offset the negative impact of the EU's protectionist policies through closer interdependence.
On September 11, 2023, at the International Container Terminal of Taicang Port Area of Suzhou Port, a batch of new energy vehicles will be exported to foreign markets through foldable vehicle frame boxes. Visual China Photo
Security-based policy tools
The EU's de-risking policy towards China is largely based on security considerations. From the EU's perspective, the increasingly intense geopolitical competition and even confrontation between China and the EU will put the EU at risk in its China-EU economic and trade relations. The EU believes that the risks are mainly reflected in two aspects:
First, if the EU and China have very close economic and trade interdependence, in the future, under more extreme conditions, the EU economy will suffer unbearable consequences due to China's sudden sanctions against the EU, or the objective sudden severance of the connection between the two markets. Therefore, reducing mutual dependence with China can prevent the EU from suffering losses due to the active or passive severance of the overall Sino-EU economic and trade relationship under potential extreme conditions in the future.
Therefore, the emphasis on diversification of external market ties, reducing rather than deepening economic and trade ties with China, or “de-risking”, has increasingly become the mainstream discourse of the EU’s economic and trade policy toward China. In fact, it is trying to promote the flow of EU capital to markets outside China, and even encourage the transfer of some European capital in China abroad, and seek to break away from the Chinese commodity market or industrial chain in order to minimize economic and trade interdependence with China. However, it is worth mentioning thatThe above-mentioned China policy based on security considerations is based on unconfirmed speculation that China-EU relations will seriously deteriorate in the future.
Second, under the current reality, the EU believes that China's products or investment policies may or have already threatened or harmed the EU's domestic security. The most typical case is the hostility or suspicion of some European countries towards Huawei and ZTE's 5G products, even though these products have not been found to be technically unsafe. In reality, the EU's security-oriented economic and trade relations with China have not only been implemented in some Chinese manufactured products, but also in investment and engineering construction. EU member states will conduct potential security reviews of investments from China based on their own investment review mechanisms, investment flows and amounts. Some investments in sensitive areas (such as important infrastructure projects), key areas and high-tech areas will be difficult or even impossible to obtain approval from member states and the EU.
Differentiating Chinese investment and goods based on security reasons is part of the EU's current broad economic and trade measures against China.It is clear that this measure is unilateral in nature, as it involves almost no coordination or consultation with China, and is not an action taken through a multilateral platform such as the WTO.
In addition, since China has not adopted similar or equivalent measures against Europe, the EU's protectionist measures against China cannot be regarded as the EU's countermeasures against China's economic and trade policies toward Europe. However, the EU's unilateral economic and trade policies toward China based on the name of security - more commonly, economic and trade policies under the pretext of "de-risking" - will rapidly undermine the basis of mutual trust in bilateral economic and trade exchanges.
Environmentally friendly policy tools
The EU's protectionist economic and trade policies toward China may also be implemented in the name of environmental protection or carbon emissions. In fact, the EU has already begun to use policy tools in this regard, with the most notable case being the launch of the carbon border adjustment mechanism. Although this tool is universal in form and not specifically targeted at China, it can have a significant potential impact on the EU's economic and trade policies toward China.
According to the EU carbon border adjustment mechanism, the EU's products in six industries, including electricity, cement, fertilizers, steel, aluminum and hydrogen, are subject to this adjustment mechanism, making the EU's green standards one of the most important technical standards restricting the export of specific goods from outside the EU to the EU. Although the current carbon border tax does not cover a wide range, this does not rule out the EU expanding this scope to more industries and more products.
Of course, the EU mechanism may not be universally applicable to many commodities beyond the above-mentioned industries in the near future. On the one hand, it is subject to the EU's current inability to morally promote overly radical green policies. Because the EU's slowdown in promoting green policies and the re-use of fossil energy in the context of the Russian-Ukrainian conflict are weakening the EU's so-called "moral authority" in the green field, which makes it lack sufficient legitimacy to impose more radical protectionist measures on Chinese products in the green field. More importantly, the EU still needs a large number of final and intermediate products from abroad to protect the welfare of European residents and local production capacity. However, as the "de-risking" of China continues, and even in the future, those Chinese products that attempt to export to Europe may be blocked outside the EU borders by the EU's carbon emission standards, because by then, even without these Chinese products, it will not cause much damage to the EU, but it is likely to cause damage to China.
In other words, based on practical interests, the EU will not take large-scale protectionist measures based on carbon emission standards against Chinese goods at present, but there is no guarantee that it will not do so in the future. For example, even after the EU's anti-subsidy measures against Chinese electric vehicles are completed, if there is still strong competition between China and the EU in the field of electric passenger vehicles, the EU may impose new tariffs on Chinese new energy vehicles based on carbon emission standards per vehicle. Therefore, environmental protection-based economic and trade protectionist policies against China may be widely adopted as its "de-risking" goal towards China is achieved, which will bring more severe challenges to future China-EU economic and trade relations.
On May 9, 2024, at the Taicang Port International Container Terminal in Jiangsu Province, a batch of new energy vehicles will be exported to overseas markets through frame transportation. Visual China Photo
Human rights-based policy tools
To a certain extent, Europe is a pioneer in the field of global human rights protection. It is the birthplace of human rights advocacy in history, an active supporter of relevant UN human rights conventions, and has formulated the European Convention on Human Rights and its protection mechanism, the Council of Europe. These "titles" have made Europe an active advocate of human rights in the international community and an important promoter of human rights principles in international economic and trade relations. It has even become the main force in promoting the embedding of human rights conditions in the latest generation of free trade agreements in the world. The most famous case is that it began to systematically embed political clauses such as European human rights standards into its economic and trade policies for former colonial countries such as Africa in the fourth phase of the Lomé Convention.
These backgrounds reveal that Europe has historical roots in injecting human rights elements into its foreign economic and trade relations, especially in its interactions with the non-Western world. It is worth noting that human rights protection in international economic and trade relations has also been recognized by international authoritative organizations including the United Nations and the World Trade Organization.
In view of this, Europe is not only promoting European human rights standards in bilateral economic and trade agreements, but is also steadily promoting more legal norms related to human rights protection in the field of unilateral foreign economic and trade policies. For example, the EU passed the "Anti-Forced Labor Act" in 2022 and is promoting the use of the "Supply Chain Act". These laws directly focus on the application of human rights protection in foreign economic and trade relations.
In view of the different understandings of human rights between China and Europe and the differences in the development stages of human rights, especially the differences in the political systems of the two sides,The two sides have very different understandings of the role of human rights factors in their economic and trade relations.Under the premise that the EU is suspected of violating WTO regulations and denying China's market economy status,The EU's judgment on human rights factors in Chinese products often deviates from the actual situation in China.In other words, the EU characterizes one of the determining factors for China's high-quality and low-priced goods as the result of so-called "low human rights", completely ignoring the differences in human rights protection between China and developed countries at different stages of development, and the reality that the high quality and low prices of Chinese goods are largely due to the low-cost advantage brought about by economies of scale.
In any case, although the human rights-based excuse has not been widely used by the EU as a tool for its protectionist economic and trade policy towards China, the possibility of such a prospect is high, especially considering that it has been continuously improving these measures in law, which means that it is prepared in advance and can be immediately activated when needed.
It is possible for China-EU economic and trade relations to avoid the harm of EU protectionism
Of course, the EU's protectionist measures against China are not based only on the above three considerations. It will also use the so-called "China market distortion" as an excuse to adopt common measures including anti-subsidy and anti-monopoly, which are still "conventional" policies in the economic and trade fields. These measures are (potentially) seriously damaging or impacting China's exports to Europe of new energy passenger cars, solar panels, car batteries, wind power equipment and other products. Considering that the EU increasingly views China-EU economic and trade relations from the perspective of geopolitical competition, the possibility of it taking more stringent protectionist measures against Chinese goods and investments in the fields of security, environmental protection and human rights in the future is increasing, and the use of all these measures will probably bring China-EU economic and trade relations into a bitter winter. This is absolutely not in the interests of both China and the EU.
For Europe, although its protectionist measures can hurt the interests of Chinese goods and investments in the short term,Widespread technical and political protectionist measures will eventually backfire on Europe's inherent endowment advantages.This will reduce the external competitiveness of European goods and capital. On the contrary, protectionist measures may inspire the fighting spirit of Chinese enterprises and promote stronger growth of China's innovation capabilities. However, this does not mean that the Chinese market expects the EU to take more stringent protectionist measures against China, but rather that it is eager to establish economic and trade relations with the EU in a normal way and obtain predictable benefits from the stability of mutual relations. This is also the normal expectation of all companies in the world. Seeking and maintaining advantages in confrontation is only the last resort, although China is confident of winning the final victory.
If the EU decides to increase its protectionist measures against China in the future, China will take limited countermeasures.It is in China's interest to seek mutual reintegration of economic and trade interests with the EU rather than expand trade disputes.For China, an effective way to achieve the above goals is to allow Chinese goods and capital to enter the European market as much as possible within the scope permitted by EU law, and to attract more European capital and goods through higher quality and greater openness of the Chinese market, as well as to achieve a "reunion" of Chinese and European economic elements in third-party markets and strive to reconnect China-EU economic and trade relations.
Therefore, it is entirely possible for my country to quietly and flexibly "crack" various potential European economic and trade protectionist measures against China, which will reactivate the economic and trade interdependence between China and Europe and re-trigger the momentum for the development of economic globalization, which is in the common and fundamental interests of both China and Europe and the world.
(Jian Junbo, Deputy Director of the Center for China-EU Relations Research, Fudan University, and Deputy Secretary-General of the Shanghai European Studies Association)
The Paper special writer Jian Junbo
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