The German Auto Industry Position on EU’s Anti-Subsidy Tariffs: A Critical Analysis
Yesterday, while catching up on how various European industries view the EU’s anti-subsidy tariff (AST) on EV imports from China, I was quite taken by the complexity of the playing field. The EU’s argument is that the AST is a response to China’s trade-distorting EV industry subsidy. And that China’s subsidy is one of the main reasons the EU is awash with cheap Chinese EVs. To that end, the EU is currently conducting an investigation into those Chinese EVs subsidies.
Meanwhile, the view of the German Association of the Automotive Industry (VDA) as an example is curious, interesting and, at times, contradictory. The VDA’s stance raises important questions about the nature of trade distortions and the role of subsidies in the global market.
In a recent interview, Hildegard Mueller, the President of VDA, expressed opposition to the EU’s AST, citing concerns that these measures would not only harm the EU’s automotive industry and distort the market, but also trigger retaliatory measures from China (China might retaliate to the EU’s retaliation), potentially escalating into a trade war.
On the surface, the VDA’s position seems at least a tad contradictory, given that they do not oppose China’s subsidies to the EV industry. Instead of the AST, the VDA advocates for “a more nuanced approach” to addressing the distortions in the market. Mueller emphasises the need for an open and fair market, where any form of protectionism should not exist, and that the EU’s measures would not solve the challenges facing the European automotive industry. The VDA’s stance highlights the complexities of trade policy and the need for a balanced approach that addresses the root causes of distortions rather than simply imposing tariffs.
While China’s subsidies are distorting the market, the VDA’s opposition to the AST suggests that they believe the EU’s measures would not effectively address the distortions. Instead, they propose an active industrial strategy, including an active trade policy, to create a level playing field. Something else to be observed is that German carmakers, through their joint ventures and operations in China, benefit from the subsidies offered by China to enhance their own competitiveness and market presence in the EU’s EV sector. Their EVs are largely produced in China. The German car-markers could not bring EVs to the EU market at a competitive price without China’s subsidies. So there is certainly some VDA self-interest there beyond any dogmatic rejection of trade barriers.
It is not impossible to reconcile the VDA’s position on the EU’s anti-subsidy tariffs; I read it as “some trade distortion is okay as long as there is a net benefit to members”. And, crucially, the AST cannot be seen in isolation from its geopolitics. This tug-of-war serves as a reminder that trade policy must be carefully considered to avoid unintended consequences, but also that self-interested parties should be understood as such.
#Germany #EVs #China #tariffs #trade #EU
