Germany's Robert Habeck holds EU line on Chinese EVs, says tariffs are not punitive

Provisional European Union tariffs on Chinese electric vehicles are meant to level the playing field and are not "punitive", German Vice-Chancellor Robert Habeck told Chinese officials in Beijing on Saturday.

"And I tried to explain it to my [Chinese] partners all day long, the differentiation that these tariffs are not punitive tariffs," Habeck said in Shanghai on Saturday evening after leaving the Chinese capital.

"There's room for manoeuvre, there's room for discussion. And I hope that this room for manoeuvre will be taken now and used."

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He also warned that economic ties between China and the EU had already been affected by China's links with Russia, hinting there might be economic consequences.

"I looked at the trade figures and Chinese trade with Russia increased more than 40 per cent last year," Habeck said.

"But something like half of it is related to dual-use goods ... These are technical goods that can be used on the battlefield, and this has to stop. Otherwise, we have to stop or at least be more concrete in the feeling of the sanctions."

Earlier in the day, Habeck, who is also Germany's minister of economic affairs, said the EU spent nine months examining whether Chinese EV makers had benefited unfairly from subsidies before concluding that countervailing measures were essential.

"Common, equal standards for market access should be achieved," he said at the Climate and Transformation Dialogue in Beijing.

"It is important to understand that these are not punitive tariffs."

Habeck told Zheng Shanjie, chairman of China's National Development and Reform Commission, the tariffs were meant to compensate for the advantages Chinese EV makers gained from Beijing's subsidies.

Habeck added that countries such as the United States, Brazil and Turkey had resorted to punitive tariffs, but not the EU. "Europe does things differently," Reuters quoted him as saying.

From July 4, Chinese manufacturers including BYD, the world's best-selling EV maker in 2023, and state-owned carmaker SAIC, will face levies of up to 38 per cent - on top of the standard 10 per cent - based on the amount of subsidies they receive and their ownership nature.

The duties are meant to stem the influx of low-priced Chinese-made EVs, products the EU maintains are more competitive because of excessive subsidies from Beijing.

The EU's investigation will continue until November, when definitive duties, typically for five years, could be imposed.

Brussels insists its tariffs are in keeping with World Trade Organization rules and that it still intends to engage Beijing on ways to resolve the matter.

The Chinese Ministry of Commerce said last week that China would reserve the right to file lawsuits with the WTO over these tariffs. China also launched an anti-dumping investigation into imports of EU pork.

The ministry warned on Friday that tensions over EVs could trigger a trade war.

"The responsibility [for a full-blown trade war] lies entirely with the EU," a ministry spokesman said.

"The EU investigation improperly used anti-subsidy investigation tools to fabricate and exaggerate 'subsidy' projects.

"Chinese companies were intimidated, coerced and pressured into providing overly broad information, which involved commercially sensitive information like business secrets and intellectual property."

NDRC chief Zheng also told Habeck that accusations about "overcapacity" in China's new energy industry ran counter to economic common sense.

He said the tariffs would harm bilateral trade and bring no benefits to the EU.

"The biggest factor underpinning the rise of China's new energy industry is fair, fierce competition instead of subsidies. China will take all measures to safeguard the rights and interests of Chinese companies," Zheng said.

He also said Beijing hoped that Germany would "demonstrate leadership" within the EU on the issue and "do the correct thing".

But Habeck said he could not represent the entire EU and that he would leave much of the tariff issue to the bloc's leaders.

Lance Liangping Gore, a senior researcher with the National University of Singapore's East Asian Institute, said China had to get used to "not being able to take advantage of developed countries as a developing country".

"We are now in a post-globalisation era, there is no longer an objective standard to judge fairness. The WTO has been crippled. Most likely the [exchanges between China and the EU over tariffs] will be a game of tit-for-tat," he added.

The dialogue, which is meant to foster cooperation on climate change and the transition to a greener future, came on the first day of Habeck's three-day trip to China.

Habeck also spoke to Commerce Minister Wang Wentao before heading for Shanghai, where he will meet German businesspeople and municipal officials to discuss ways to promote trade.

For the past eight years China has been Germany's top trading partner but bilateral trade in the first quarter fell to US$64 billion, 14 per cent less than a year earlier and below the US$67 billion Germany registered with the US for the three months.

On Thursday, German special envoy for international climate action Jennifer Morgan called for collective efforts to reach climate goals and emphasised China's critical role in achieving them.

"China has a massive role to play in the green transition and dialogue with China is particularly important," she said, adding that "we need everyone".

But Morgan also said China's consumption of coal could hinder progress on those global goals.

"China's renewable energy sector has been doing very well, but its consumption of coal and building of new coal power plants are deeply concerning."

China generated 37 per cent of the world's wind and solar electricity last year - enough to power Japan, according to a report issued by London-based climate think tank Ember in May.

But it still relied on fossil fuels for 65 per cent of its electricity that year, making it the world's biggest emitter. Its per capita power sector emissions were also more than twice the global average, the report said.

Additional reporting by Sylvie Zhuang

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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