Introduction

Introduction

But our patience is also limited.

I thought that since the EU finally voted at the beginning of the month, this farce about the EU's tariffs on imported electric vehicles from China had already been settled and would not change. However, it seems that there may still be a turnaround.

Last weekend, news spread that Chinese Minister of Commerce Wang Wentao, at the invitation of Valdis Dombrovskis, Executive Vice-President of the European Commission and Commissioner for Trade, held a direct video conference consultation on the recent EU-China new energy vehicle-related matters in Central and Eastern Europe.

It was not a telephone conference call, nor was it the exchange of formal letters filled with cliches and diplomatic rhetoric, but a remote "Face To Face" conversation through a live connection.

Photo | The agenda of the G20 Trade Ministers' Meeting was generally very compact and busy, and Dombrovskis worked around the clock, which was quite a feat. Fortunately, trade disputes have not only plagued China's Ministry of Commerce personnel in recent years.

Even more intriguing is that Dombrovskis was attending the G20 Trade Ministers' Meeting in Brazil at the time. To coordinate with Minister Wang, the meeting began around 11 p.m. local time in Brazil, and when the two sides finished their exchange and hung up, it was already early in the morning of the next day.

Considering that Dombrovskis, who specializes in trade policy within the European Commission, is already 53 years old and is participating in the G20 Trade Ministers' Meeting, he needs to rush to multiple forums and engage in a large number of high-level interactions early the next morning. Such late-night work is indeed a feat.

However, the issues involved in this work are indeed worth fighting for. As discussed in our previous article, "The Gap between China and Europe is Still Widening at This Paris Motor Show," raising tariffs is not the goal for the EU's decision-makers or even the country that initiated the tariff issue. The key is to find a way to allow China to share the benefits of the new energy vehicle industry.

Photo | France's logic in leading this initiative is actually quite simple: even if China retaliates, it will only counter the European automotive industry, so what harm does it do to France, which has little automotive interest in China? What a beautiful dream!

As it stands now, the EU has raised the tariff stick high and officially announced when it will fall. If the consequence is not to lure Chinese automakers to build factories in Europe, as the European Commission hopes for in its tariff-driven investment scenario, but instead to receive a fierce retaliation from China with the same tariff stick raised high – then the so-called high-vote approval of the tariff increase bill is essentially a pyrrhic victory.

In short, when the resolution was passed half a month ago, everyone thought that from then on until the tariff measures were implemented, it would be "garbage time." What was unexpected was that the EU's true intention was actually for hardline politicians to "promote trade through war," ultimately turning it into an "overtime" game.

One detail is particularly noteworthy.

Negotiations are beneficial, and cooperation is win-win. However, as mentioned above, whether it is reaching a price commitment or deciding to invest in building factories in Europe, the premise of all cooperation is to establish sufficient mutual trust between each other.

Photo | Not long ago, domestic automakers and European dealers rushed to export a wave of vehicles during the final window of opportunity

In fact, the European Commission and even the countries that initiated this tariff measure have not forgotten to engage in various tricks and underhand tactics on and off the table.

In response to this China-EU trade dispute, as early as the middle of this year, 12 domestic electric vehicle companies had already reached a consensus and authorized the China Chamber of Commerce for Import and Export of Machinery and Electronic Products to negotiate on their behalf regarding European tax-related matters. On August 24, they submitted their price commitment proposal to the EU.

However, while the European Commission agreed to review the draft proposal submitted by China, it also showed a nitpicky attitude towards many technical details related to the final price commitment.

For example, it requires Chinese automakers to set different minimum prices for each model of every electric vehicle brand exported to Europe, tailored to different countries, including even the customizable parts based on optional content. At the same time, the EU negotiators also demanded that all differentiated models be declared and audited separately.

Photo | Every car model, and even every configuration adjustment, whether it's a color change or a feature addition, counts as a new model and requires separate auditing – this is clearly nonsense

This means that the European Commission wants to infinitely segment the types of electric vehicles produced in China according to their needs and closely monitor the pricing of each segment. Moreover, when importing and declaring goods, different models need to be audited separately.

For example, if an automaker produces hundreds of vehicles with different colors, optional or non-optional intelligent driving systems, and heated/ventilated seats based on the varying configuration demands of European users for a particular model during a certain period and delivers them collectively after a month. According to the conditions set by the European Commission negotiators, each vehicle configuration must be audited separately, and even vehicles ordered by owners in different countries need separate audits.

In reality, such an operation is, of course, impossible, and it may not even be the European Commission's true intention. However, even though commercial trade negotiations are inherently a game of "asking for the moon and offering pennies," such meaningless actions actually greatly increase the complexity of the negotiations and the time cost required for mutual compromise between the two parties. Apart from simply delaying time and annoying the Chinese representatives, they serve no purpose.

Photo | If the tariff increase resolution is officially enforced, SAIC Motor's MG brand, which has a good momentum of development in Europe, will bear the brunt

So far, the technical team dispatched by China to Brussels for negotiations has been working continuously for nearly a month, during which they have held multiple rounds of intensive negotiations with the EU team, with some consultations involving technical details lasting several hours. However, the European Commission still insists stubbornly on many conditions.

In addition to the unreasonable demand for "segmentation" mentioned above, the European side has also resorted to deceitful tactics during negotiations. For example, trade representatives from some countries have tried to bypass China's unified negotiation team and negotiate separately with individual companies, even promising them some benefits for this purpose.

This scene is reminiscent of the "divide and conquer" tactics employed by Rio Tinto negotiators during the iron ore price negotiations between China and Australia 15 years ago.

On the 16th of this month, when news of the European Commission's separate contacts with automakers was exposed by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, there was a small uproar in domestic public opinion about "uncovering traitors."

However, such public outrage is not without controversy, and the unwarranted connections inevitably implicate innocent parties. Moreover, the Chamber's unnamed operation is clearly not intended to target its own enterprises but merely to remind everyone of the principle that "united we stand, divided we fall."

Photo | From another perspective, the fact that such precautions are being taken proves the success of China's new energy vehicle industry

For companies, exploring and testing the opponent's bottom line may have its own commercial logic. However, since things have developed to this point, how can any company stay out of it now?

In fact, while the European Commission's negotiation team appears tough and stubborn, its backers are also troubled by China's possible retaliatory trade sanctions. After all, trade frictions never remain limited to the unilaterally initiated area. French brandy is just the appetizer; there are plenty of other areas where the EU can strike back.

After all, by 2024, there are not many essential and basic products that Europe can export to China. Moreover, the truly profitable items are high-margin luxury goods that, even if completely cut off, would only help China save foreign exchange.

Photo | The fundamental demand of the EU is actually to protect livelihoods and promote employment. The purpose of tariffs is to promote investment and limit prices. Once it spirals out of control into a trade war, it will create a big mess for the loose EU group by pressing down on one problem only to have another pop up...

In today's world, where cheap energy sources are monopolized by Europe, and with the increasing likelihood of Donald Trump's second term, it's unclear who is afraid of whom. If each side truly goes rogue and tries to "divide and conquer," who would panic first between China and the EU? It's a no-brainer.

Fortunately, the video consultation between Minister Wang Wentao and Dombrovskis last weekend conveyed some good news, or even significant positives. During the consultation that day, the two sides reached an essential consensus above the negotiation team level – to clarify that the price commitment would continue to be the solution path for this case.

Furthermore, both sides also clarified their willingness to conduct further consultations. This means that even if the European Commission determines the final ruling on October 30 as scheduled, and even if this ruling may still uphold the decision to impose tariffs, both sides can still bridge their differences and continue negotiations with the goal of eliminating tariffs.

Photo | On October 30, we're waiting! Regardless, it is certain that tariffs will be imposed on China's electric vehicle exports. The question is how much. So the key now is, for France and even European luxury goods, which have no resistance, how much tax should be imposed first?

Inadvertently, the European Union's bottom line has already been revealed. However, there is still a problem here –

Our patience is also limited.