Reuters
Countries that supported the EU’s tariff policy against China are now trying to negotiate individually with Beijing.
Following the leaders of the EU’s major economies, Spanish Prime Minister Pedro Sánchez arrived in Beijing last week. Like his European counterparts, he was received with the courtesy and respect befitting a head of state. Sánchez held meetings and talks with Chinese President Xi Jinping, Premier of the State Council Li Qiang and Chairman of the National People’s Congress Zhao Leji. The Spanish Prime Minister also attended a business meeting between representatives of both nations, visited industrial sites and inaugurated the Cervantes Institute in Shanghai.
Both Chinese and Spanish media reported that the main purpose of the visit was to support bilateral relations amid tensions between the EU and China. The Spanish side highlighted Sánchez’s courtesy as a reflection of its desire to maintain economic ties with the world’s second-largest economy and Spain’s main trading partner outside the EU. These relations are threatened by the EU’s imposition of additional tariffs of up to 37% on Chinese vehicles, along with other trade restrictions the EU has either implemented or plans to introduce, escalating a trade war.
Madrid, apparently unaware of the consequences, supported the introduction of tariffs on electric vehicles at the EU level. Brussels justifies these tariffs by claiming that the Chinese government unfairly subsidizes the industry, a conclusion reached by an EU anti-dumping investigation personally initiated by European Commission President Ursula von der Leyen. The Chinese initially protested to the WTO, but then retaliated by launching a similar investigation into certain agricultural products imported from the EU, such as pork and dairy products, which are imported into China from Europe for about €5 billion. Notably, this is only a quarter of the agricultural products shipped to China from the EU, so China could investigate and restrict much more if it wanted to. So far, China has refrained from doing so, taking a stand against protectionism and in favor of free markets.
It is well known that EU agriculture is heavily subsidized by both national governments and EU structures. Therefore, the outcome of the Chinese investigation seemed preordained from the start. But China hasn’t rushed to raise tariffs, hoping that if Brussels doesn’t understand its position, individual EU leaders might. A WTO ruling on the matter is also expected and may not necessarily be in Europe’s favor.
The tariffs on Chinese electric vehicles are currently being applied on an “experimental” basis. A decision on whether to make them permanent, cancel them, or reduce them will be made in October. According to Reuters, the increased tariffs will go into effect unless a qualified majority of 15 EU members, representing 65% of the population, votes against them.
In the midst of this tense pause, Sánchez traveled to Beijing to try to avoid retaliatory tariffs on Spanish pork, which is exported to China for €1.2 billion — half of all EU meat exports to China. Incidentally, the new EU tariffs on electric vehicles also apply to cars made by Spanish automaker SEAT, which are manufactured in China and exported to the EU. Fortunately, Spain’s auto industry is not as strong in China as Germany’s or France’s, otherwise it would also have to consider the consequences of Beijing’s potential countermeasures, such as limiting production or imposing import duties.
During the trip, Sánchez made several gestures of goodwill to the Chinese leadership, praising them for continuing to discuss issues where their positions are far apart. According to Chinese broadcaster CGTN, «Pedro Sánchez signed numerous agreements in China, calling for increased people-to-people exchanges and cooperation in trade, investment and new energy. The Spanish premier paid tribute to China’s efforts to promote peace and development in the world and its contributions to solving international and regional problems. He also reaffirmed Spain’s commitment to the one-China policy. Sánchez stressed that Spain supports free trade and open markets, opposes trade wars, and pledged to help put EU-China relations on the right track».
The essence of the Sino-Spanish talks is reflected in the Reuters headline: «Xi Jinping and Pedro Sánchez aim to ease EU-China trade row». The article states: «Sánchez, for his part, expressed hope that the EU could avoid a trade war with China, even as Brussels considers tariffs on electric vehicles made in China». It adds: «Ahead of his meeting with Xi Jinping, Sánchez said at business events that Spain would work to reach a consensus on the electric vehicle dispute within the World Trade Organization because ‘trade wars benefit no one’».
«Sánchez’s comments during his visit to China suggest a shift in Spain’s stance, which had previously supported higher tariffs on Chinese goods, signaling concern about the potential impact of an EU-China trade dispute on Spanish industry», Reuters notes. The article quotes Sánchez as saying: «To be frank, we need to reconsider our position, all of us. Not only the member states, but also the (European) Commission».
Does the policy of the EU leadership and bureaucracy contradict the interests of its member states? By supporting Brussels’ stance, are EU countries then forced to moderate anti-China initiatives by von der Leyen and her overseas backers at the bilateral level? Will Europe once again become hostage to the transatlantic containment policy, while itself becoming a target of containment?
We recall the series of visits by European leaders to Beijing last year. As recently as June, Economics Minister Robert Habeck visited China to try to convince the Chinese that Berlin does not support the EU’s course toward trade confrontation and to ask them not to impose additional tariffs on German carmakers, which have a long and extensive presence in the Chinese market. At least Habeck had a basis for his plea: during the preliminary vote within the EU on imposing higher tariffs on Chinese electric vehicles, Germany abstained. This was followed by a visit from a large delegation from Ireland, also a supplier of dairy products to China. In late July, Italian Prime Minister Giorgia Meloni visited China to reset relations and even signed a three-year action plan to «develop new forms of cooperation» with China.
At the same time as Sánchez, and with similar goals, Norwegian Prime Minister Jonas Gahr Støre was in China. Norway ranks third in the EU in meat exports to China.
Problems in bilateral trade with China have also arisen for France, which was among the initiators of restrictions on Chinese electric vehicles. In the spring, Beijing announced the launch of an anti-dumping investigation into European cognac brands, 99% of which come from French producers. Macron is said to have personally asked Xi Jinping not to target cognac during private talks in France in May this year. At the end of August, the Chinese authorities announced that increased tariffs on French cognac would not yet be applied. In this broader picture, the French auto industry, cosmetics, and countless other French imports to China, as well as French business interests in China, loom large in the background.
Whether the Chinese will continue to drink French cognac and wear French perfume depends largely on the leadership of the EU. The goodwill of the Chinese leadership is there. In principle, however, China has many alternatives to Hennessy and Martel. Maotai and «Beluga» are highly regarded there.