POLITICO — 2024-06-27
Automotive Industry
Transport Minister Volker Wissing calls duties a “destructive approach” on third visit by a government leader in recent weeks.
Don’t worry, we can still be friends.
That’s Berlin’s message to Beijing just as the Middle Kingdom’s relations with the European Union are hitting a new low, with Brussels slapping tariffs on Chinese electric vehicles from 4 July 2024 and Beijing retaliating by launching an anti-dumping probe into EU pork products.
Scrambling to avert collateral damage to the bilateral relationship, the German government’s diplomatic charm offensive is now in full swing. On Wednesday, 26 June 2024, Chancellor Olaf Scholz claimed that Brussels and Beijing’s ongoing negotiations to avert the duties were happening thanks to Berlin’s efforts.
“I am very pleased that it is also thanks to the initiative of the Chancellor and my government that ... the trains are now not simply running toward each other, but that the European Union and China are now talking about a common path on the issue of car tariffs,” he said in a speech to German lawmakers on the eve of an EU leaders’ summit in Brussels.
Berlin — which, on paper, is seeking to diversify away from Beijing, but whose struggling economy still relies heavily on China — has been the most vocal opponent of the duties within the bloc. Realizing that it couldn’t avert the tariffs, Berlin launched a late push to keep them as low as possible — to no avail.
Now, Scholz wants to make sure he’s still seen as the good cop in Beijing. On Monday, 24 June 2024, the Social Democrat told a gathering of business leaders he had “strongly insisted” that the Commission offer Beijing customs talks, adding he had discussed the issue “very carefully” with Commission President Ursula von der Leyen.
Yet attempts to distance itself from Brussels’ increasingly hawkish stance are making the German government “look kind of weak,” said Niclas Poitiers, an economist at the Bruegel think tank in Brussels. Doing so “undermines the message that everyone else is sending,” he argued, pointing out that Germany is, after all, a member of the EU.
Shuttle diplomacy
Beijing, meanwhile, has seen more high-level German visitors than usual lately.
Transport Minister Volker Wissing on Thursday, 27 June 2024, rounds off a trip to China with a visit to tech metropolis Shenzhen. The comparatively low-profile visit, on which Wissing was mostly accompanied by a small team from his ministry, included political meetings in Beijing and a visit to a transport logistics fair in Shanghai. The two countries agreed to set up a dialogue format on cross-border data traffic.
The trip came just after Vice Chancellor and Economy Minister Robert Habeck traveled to China — for years Germany’s largest trading partner — for the first time during his tenure.
In Shanghai on Monday, 24 June 2024, Wissing called duties a “destructive approach,” and added: “I appeal to the European Commission not to strive for tariffs, but for good and fair competition rules.”
Within his liberal Free Democratic Party, Wissing is known for taking on a more friendly stance toward China than many other senior German figures. He denied that the two ministerial trips were linked to the EU’s announcement on duties, arguing that “the order of our trips is a coincidence.”
Habeck, a Green politician known for his communication talents, slightly diverted from the line taken by Wissing and Scholz, who visited China in April in 2024. He sought to explain to Beijing why the duties were in fact necessary — and linking a deterioration in trade ties directly to China’s support for Russia in its war against Ukraine.
“It is important to understand that these are not punitive tariffs,” Habeck said last weekend, contrasting the EU measures with those implemented by countries such as the US, Brazil and Turkey. Habeck said that, for nine months, the Commission had examined in great detail whether Chinese companies had benefited unfairly from subsidies.
His approach made for some heated exchanges — a planned meeting with Premier Li Qiang, responsible for the country’s economic development, was eventually canceled.
Brussels talks
Back in Brussels, civil servants from the Commission and Chinese sides are meeting to discuss the EV duties on a technical level. Consultations opened this week after the bloc’s trade chief Valdis Dombrovskis took a video call last Saturday, 22 June 2024, with his Chinese counterpart, Minister of Commerce Wang Wentao.
“It’s definitely one step further than regular diplomacy,” estimated one Brussels-based trade lawyer who was granted anonymity to discuss confidential details. The Commission will be ready to listen, they expected, but will let any concessions depend on “what the Chinese are offering and how afraid they are that the case will not stand without a deal.”
Any deal would need to happen at the latest before November 2024, when the duties would become definitive for five years. A representative from the Chinese business community expressed worries that they “don’t see the possibility that the EU side would drop the provisional tariffs on 4 July 2024 due to the complexity of the consultations,” instead aiming for the fall.
Until next week’s deadline (first week of July 2024), the influence of the EU’s 27 countries on the development of the case is limited. They may submit their opinion in writing, but the Commission does not have to take it into account for now. Before the final call in November 2024, however, the capitals get to hold a binding vote.
China has tried to throw a carrot in the direction of Germany’s car makers by suggesting it could actually lower its own tariffs on large-engine cars, rather than hike them in retaliation. Even though German car makers have set up factories in China across the board, these focus on smaller and more affordable models aimed at the Chinese market. Expensive SUVs are still mostly made in Germany.
Meanwhile, the Brussels talks include Chinese civil servants both from Beijing and from the country’s embassy to the EU. They are set for some more long workdays, according to the business representative, as they “worked till late evenings.”