EU Set to Send Envoys to China to Explore EV Tariff Alternative
- People familiar caution getting a deal remains complicated
- New tariffs on EVs from China entered into force on Wednesday
The European Union has decided to send officials to Beijing to hold more talks aimed at finding an alternative to tariffs on electric vehicles from China, according to people familiar with the matter.
Agreeing to accept China’s invitation to travel to Beijing suggests there is some momentum in the negotiations, the people, who spoke on condition of anonymity, said. They cautioned, however, that a deal to replace the levies, which came into force on Wednesday, remains complicated. Plans were still being finalized and need to be coordinated with Beijing, the people said.
Read more: EU Imposes Tariffs on China EVs, Risking Retaliation
The two sides have been exploring whether an agreement can be reached on so-called price undertakings — a complex mechanism to control prices and volumes of exports, used to avoid tariffs. Both Brussels and Beijing have indicated that the differences remain significant.
Eight rounds of talks have so far failed to yield a breakthrough and proposals put forward haven’t yet met the EU’s strict requirements, including alignment with World Trade Organization rules and matching the effect of the duties. The 27-nation bloc also wants to ensure the EU can monitor the arrangements for compliance and enforceability.
Still, talks have made some progress in recent days and negotiators have been exploring whether the conditions of the undertakings can be simplified, some of the people said. That’s especially the case when dealing with new models not yet being exported 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, the people added.
Separate Deals?
Another stumbling block has been China warning carmakers against seeking individual deals with the EU.
Beijing wants everyone under an umbrella agreement, as part of talks being led by a Chinese trade body. According to the EU’s regulation, that trade group made a pricing proposal on behalf of 12 exporters, including SAIC Motor Corp., BMW Brilliance Automotive Ltd., and Zhejiang Geely Automobile Co.
The EU has said that individual agreements are possible under WTO rules.
The bloc has been eyeing individual pricing agreements with some carmarkers, including two from the Geely group. Such arrangements would see the tariffs lifted on models covered by the alternative deals.
The discussions come as the EU adopted tariffs as high as 35.3% this week, on top of an existing 10% rate. A deal can still be reached even now the levies are in force. The impact of the duties will likely take some time as there has been a surge in imports in recent weeks in anticipation of the move, some of the people said.
Automakers Headed for Higher Tariffs in EU
Planned levies on Chinese EVs are on top of 10% rate
Source: Bloomberg News
China has threatened to freeze investments in member states that backed the tariffs and retaliate with penalties of its own on European goods, including dairy, pork and brandy, as well as cars with large engines.
Both sides have said they will defend their interests at the WTO. The European Commission didn’t immediately reply to a request for comment.
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