(Bloomberg) — Trade negotiations between the European Union and China have been plagued by major disagreements, with planned tariffs on Chinese-made electric vehicles likely to come into effect at the end of this month.
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The EU and China have pledged to work on an alternative deal that would avoid the need for tariffs, after EU member states agreed earlier this month to impose duties of up to 45% on Chinese-made electric vehicles. Chinese negotiators left Brussels last week after eight rounds of talks ended without an agreement.
China has threatened to raise tariffs on vehicles with large engines and said it will impose duties on cognac, hitting the EU’s two biggest economies, Germany and France. The EU did €739 billion in trade with China last year.
Beijing warned the EU this weekend against holding price talks with individual manufacturers while negotiating with a group of carmakers represented by the Chinese Chamber of Commerce for the import and export of machinery and electronic products.
The bloc has received proposals from the China trade body that represents a group of manufacturers, as well as individual offers from other automakers, according to EU officials familiar with the discussions.
The EU has said any solution must be compatible with World Trade Organization rules, be adequate to address the level of subsidies identified by the bloc’s investigation, and be able to be monitored and enforced.
Despite the complications in the negotiations, the two sides plan to continue talks.
The EU – which said Beijing unfairly subsidizes its industry – is analyzing data from carmakers in China to see if a mechanism to control prices and export volumes could be used instead of the tariffs, said the officials, who spoke on condition anonymity.
Talks with China have made some progress, but key sticking points remain, especially around finding the right pricing structure and ensuring that any alternative offer has the same impact as the proposed tariffs, the officials said.
The EU also wants to ensure that any agreement can be properly monitored and enforced and cannot be undermined by sales 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 reached in the coming weeks.
“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 tariffs, told reporters on Monday on the sidelines of a Western Balkans conference in Berlin.
The EU has sent a new set of questions to China and expects talks to resume soon, the officials said. Another option allowed under WTO rules is different deals with individual companies that can take place at different times.
An agreement can still be reached after the rates come into effect at the end of October.
–With help from Michael Nienaber and Iain Rogers.
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