European Union sees little chance of success in EV tariff negotiations with China

The European Union sees very limited progress in negotiations with China aimed at finding an alternative to tariffs on electric vehicles and the bloc currently sees little prospect of a quick deal, according to people familiar with the matter.

China and the EU will continue technical talks this week after discussions in Beijing where both sides touted some progress.

However, the chances of a deal remain slim for now, said the people, who spoke on condition of anonymity to discuss private negotiations. China hasn’t yet moved toward the EU’s strict requirements on ensuring that any arrangement is enforceable and matches the effect of the anti-subsidy tariffs the bloc adopted last month, the people added.

The two sides have been exploring an agreement on so-called price undertakings — a complex mechanism to control prices and volumes of exports, used to avoid tariffs.

Recent talks have mostly focused on establishing a communication mechanism between Brussels and Beijing as well as avoiding the risk of so-called cross-compensation, whereby any minimum import prices on EVs are offset by sales of other goods such as hybrid cars and accessories, the people said.

The two sides also remain at odds over the possibility of agreements with individual carmakers, including European firms that have joint ventures with Chinese companies. The EU argues that such deals would be compliant with World Trade Organization rules while Beijing insists on negotiating an umbrella agreement led by a Chinese trade body.

China has threatened to respond to the EV levies with tariffs of its own on dairy, pork and brandy. The EU has said it will defend its interests in those cases while resisting linking the probes via some form of grand bargain.

Earlier this month, Beijing filed a request with the WTO to hold dispute consultations on the EV tariffs. The EU adopted additional definitive tariffs of up to 35% last month and those will stay in place for the next five years without an alternative agreement.

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