China files complaint with WTO against European levies on EVs

China is challenging at the World Trade Organization (WTO) the provisional European import tariffs on Chinese electric cars decided by the European Commission in July. In doing so, Beijing calls on the EU to “immediately stop the bad practices.” It denounces a “serious” violation of WTO rules and argues that the duties compromise the fight against global warming.

In early July, the EU decided to impose provisional duties on imports of EVs from China immediately at Europe’s external borders. The levies are intended to protect European manufacturers from unfair competition from Chinese companies that can supply similar models cheaper thanks to extensive government support.

Unfair competition

BYD, China’s largest maker of EVs, for example, has received at least 3,4 billion euros in government subsidies, according to Germany’s Kiel Institute for The World Economy. The provisional levies vary from carmaker to carmaker, depending on the state’s support. The highest levy is 37,6%, and the levies apply for a maximum period of four months.

If the Commission and China do not find a solution during that period, and new negotiations have already begun, the Commission may propose to member states to introduce final five-year levies in early November. Importers do not actually have to pay these provisional levies now; they must submit bank guarantees to customs.

Countermeasures

The WTO can help settle trade disputes between member countries. The organization’s website states, “The WTO has one of the world’s most active international dispute settlement mechanisms.”

In July, China also asked the WTO to set up an expert panel following its complaint against subsidies for EVs in the United States. The complaint targets subsidies President Joe Biden’s US government gave on EVs made in the United States.

Several Chinese EV manufacturers, meanwhile, are accelerating the expansion of their production facilities in Europe to avoid the duties. BYD, for example, will build a new state-of-the-art passenger car factory in Szeged, Hungary.

Beijing also seems to be considering countermeasures. For example, the government has launched an investigation into three companies. They are suspected of dumping pork for the EU and selling products on the Chinese market at an artificially low price. Chinese manufacturers also advocate for a 25% tariff on large European vehicles with combustion engines over 2.5 liters in capacity.

The measures have also affected several European and American manufacturers, including Volvo, BMW, and Tesla, that produce in China.