Image default

“I don't expect a trade war”


The EU Commission has imposed provisional tariffs on Chinese electric car manufacturers. China is reacting in turn. Trade expert Julian Hinz from the Kiel Institute for the World Economy sees this as a sign of de-escalation. As a trade expert, how concerned are you about the provisional EU tariffs on Chinese electric cars?

Julian Hinz: I do not see this as a threat to the European economy. These are countervailing tariffs – not punitive tariffs. The previous investigation showed that prices in Europe were too low due to Chinese state subsidies. The natural price of electric cars produced in China will now be restored on the EU market.

Julian Hinz, Head of the Trade Policy Research Center at the Kiel Institute for the World Economy

To person

Julian Hinz is Professor of International Economics at Bielefeld University and Head of the Trade Policy Research Center at the Kiel Institute for the World Economy (IfW Kiel).
For the IfW Kiel, together with researchers from the Austrian Institute of Economic Research (WIFO) and the Supply Chain Intelligence Institute Austria (ASCII), he calculated the economic consequences of the e-car countervailing tariffs on the European economy.

“Those who are supposed to be protected are not happy” EU car manufacturers should actually be happy about fair competition conditions. But this is not the case. The German Association of the Automotive Industry (VDA) is one of the loudest critics of the measures. Why is that?

Hinz: This is indeed an interesting situation. The very people who are supposed to be protected are not happy. After all, European car manufacturers have so far been competing in the EU with the artificially low prices of Chinese manufacturers. The point is, however, that European car manufacturers could also be affected – namely if they produce in China and sell in the EU. However, they can contact the EU Commission and request that the tariffs be adjusted for them. So far, the tariffs are only temporary. What effects could this have on the European economy if they are introduced permanently?

Hinz: If introduced permanently, they could potentially strengthen European value creation – by producing more electric cars for the EU market locally in the EU in the future. We at the Kiel Institute for the World Economy have calculated this. However, the prosperity effects in many EU countries will be barely noticeable at less than 0.01 percentage points.

How the European Union could reduce costs The EU actually wants to accelerate the green transition – now it is imposing countervailing duties on electric cars. Isn't that paradoxical?

Hinz: There is actually a conflict between two political goals here. Various studies show that Chinese subsidies distort competition. The EU insists on fair competition – and enforces WTO law with countervailing tariffs. On the other hand, the EU is certainly benefiting from cheap Chinese electric cars for its climate strategy. What can the EU do to ensure that electric cars remain affordable in the EU? Concluding new free trade agreements is not an easy task, as can currently be seen in the examples of Mercosur and Australia.

Hinz: New trade agreements are indeed a complex and lengthy matter. Both sides must reach a comprehensive agreement. But the EU actually has an option for cutting costs quickly and independently. It is currently levying tariffs on WTO trading partners with whom it does not have a free trade agreement – these are currently at a level of ten percent. A very quick option would be to reduce these import tariffs. The EU can decide this autonomously. And it would also be completely permissible under WTO law.

“China acts on the basis of WTO rules” Belarus has just officially joined an alternative alliance of states, the Shanghai Cooperation Organization (SCO). China and Russia are gathering allies there. Could this pose an economic threat to the EU?

Hinz: No, it is an extremely heterogeneous group. It cannot be compared at all with groups of states such as the EU or the European Economic Area and their economic power. In response to the EU's provisional tariffs, China has announced an anti-dumping review of European pork. Are we now facing a trade war?

Hinz: No, I think the opposite. I see this more as a de-escalating action. The Chinese have initiated a WTO-compliant review. This is their right and it shows that they are acting on the basis of the rules of the World Trade Organization. In addition, tariffs on pork are likely to have a noticeable impact on individual European companies and the sector – but there are other EU sectors where tariffs would have much more drastic consequences. But Beijing is not targeting these. I therefore interpret it as a sign that they are willing to negotiate.

The interview was conducted by Alina Leimbach, ARD finance editor.

Related posts

Leave a Comment

* By using this form you agree with the storage and handling of your data by this website.