EU, China face hurdles in clinching EV deal before tariffs start

Trade negotiations between the European Union and China have been plagued by major disagreements, with planned tariffs on Chinese-made electric vehicles likely to kick in at the end of the month.

The EU and China have pledged to work toward an alternative agreement that would avoid the need for levies after EU member states agreed earlier this month to adopt levies as high as 45 per cent on EVs made in China. Chinese negotiators left Brussels last week after eight rounds of talks ended without a deal.

China has threatened to raise tariffs on large-engine vehicles and said it will start collecting duties on cognac in moves that would hit the EU’s two largest economies, Germany and France. The EU did €739 billion ($806 billion) in trade with China last year.

Beijing warned the EU over the weekend against conducting price discussions with individual manufacturers while also negotiating with a group of carmakers represented by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.

The bloc has received proposals from the Chinese trade body representing a group of manufacturers as well as individual offers presented by other carmakers, according to EU officials familiar with the discussions.

The EU has said that any solution would need to be compatible with World Trade Organization rules, adequate in tackling the level of subsidies established by the bloc’s investigation and capable of being monitored and enforced.

Despite the complications in the negotiations, the two sides plan to continue talks.

The EU — which said Beijing unfairly subsidises its industry — is analysing data from car manufacturers in China to see if a mechanism to control prices and volumes of exports could be used in place of the tariffs, said the officials, who spoke on the condition of anonymity.

The talks with China have made some progress but key sticking points remain, especially on finding the right pricing structure and ensuring that any alternative offer has the same impact as the proposed tariffs, according to the officials.

The EU also wants to make sure that any agreement can be properly monitored, enforced and not be undermined through the sale of other products and services exported by the same companies, one of the people said.

German Chancellor Olaf Scholz said on Monday that he remains hopeful that an agreement can be sealed in the coming weeks.

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“I have the impression that our shared hope is that there will be an agreement with China by the end of October," Scholz, whose government voted against the levies, told reporters on the sidelines of a Western Balkans conference in Berlin Monday.

The EU has sent a new set of questions to China and expects talks to resume soon, according to the officials. Another option allowed for under WTO rules is for different deals with individual companies that could happen at different times.

An agreement can still be reached after the tariffs come into effect at the end of October.

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