A Globally Competitive EU?
EU and China Set to Discuss EV Tariffs as New Trade Measures Loom, a New Report on EU's Challenges Competing Amidst a Changing Geopolitics Environment
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Key Public Policy Developments this Week:
EU-China Talks Begin on Proposed EV Tariffs Amid Rising Trade Tensions
Mario Draghi in a new Report Warns of the EU's Challenges Competing in a Changing Geopolitical Environment
And our Recommended Read This Week
EU-China Talks Begin on Proposed EV Tariffs Amid Rising Trade Tensions
What happened: The EU and China have agreed to commence discussions about the proposed EU tariffs on EVs from China. The EU announced on 12 June that from 4 July it would apply provisions countervailing duties on Chinese EV imports.
Why this matters: The announcement that the EU and China will seek to negotiate an outcome to avoid the proposed EU tariffs on Chinese EVs coming into effect, reflected growing Chinese concern over rising tariffs on its EV exports. Imports of Chinese EVs into the EU increased from $1.6 billion in 2020 to $11.5 billion in 2023. Chinese and Chinese-owned EV brands grew from 1 percent of the EU market in 2019 to 8 percent in 2022, with the European Commission warning that figure could reach 15 percent by 2025. This week, Canada also announced that it would commence investigations into its Chinese EV imports, following the EU path that could also lead to Canada imposing countervailing tariffs aimed at offsetting the subsidies received by China’s EVs. For instance, BYD received €2.1 billion in direct government subsidies in 2022. These actions by the EU, but also the US and Canada are similar in that they are aimed at addressing the impact of subsidized Chinese EVs, at a time when the EV sector is increasingly seen having economic and national security significance. That said, the US announced 100% tariffs on Chines EVs sends a clear signal that it will not tolerate any Chinese EV imports, whereas the EU (and most likely the Canadian approach) which relies on countervailing duty authority that is also WTO consistent, is seeking to balance domestic concerns and action that does not lead to Chines retaliation that closes off its auto market to EU exports. Whether this balanced approach succeeds remains to be seen, particularly whether the proposed EU tariffs have the desired impact on Chinese EV imports.
Mario Draghi in a New Report Warns of the EU's Challenges Competing in a Changing Geopolitical Environment
What happened: On 14 June, Mario Draghi (former Italian Prime Minister) in a report titled "Radical Change - What Is Needed", outlined the key challenges facing Europe from large-scale US and Chinese industrial policy, rising geopolitical risk and climate change. This report was commissioned by the EU Commission. According to Draghi, the EU is ill-prepared with low productivity, high electricity costs that will also impede AI development, lack of EU level coordination on spending on R&D and the need to increase EU investment in its defense. In his report he outlines steps the EU must take, highlighting the need for the EU to focus less on intra-EU competition and more on building the EU into a globally competitive actor.
Why this matters: Mario Draghi as former Italian Prime Minster and ECB President is an astute observer of the EU economic challenges and political roadblocks to addressing them. The title of his report underscores how urgent he sees the challenges faced by the EU. The criticism of EU energy policy is on point and a not-so subtle swipe at Germany’s energy policy that had assumed that Putin could be tamed by Russia’s dependence on its energy exports to the EU. More importantly perhaps is the acknowledgement of a rapidly changing the world that the EU must do a better job of adapting to it.
Recommended Read This Week
OECD Report titled AI, Data Governance and Privacy, synergies and areas of international cooperation.
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