The EU is to limit the number of hybrid electric vehicles imported from China to 350,000 cars a year, the European Commission has confirmed. Imports have been soaring in the past two years; about 800,000 battery and plug-in hybrids are likely to be sold this year. The EU expects that the quota, which will come into force in December, will halve China’s market share, which now stands at 6% in a landmark four-year agreement made in Beijing last week.
The annual limit on imports of hybrids will be taken under the World Trade Organization safeguard measures, which mean it can be implemented swiftly without the type of investigations needed in anti-dumping measures. Any cars imported above the quota level will not be subject to tariffs, but will remain blocked in customs at docks in Europe. Chinese vehicles assembled within the EU, such as those made in Hungary or, in future, Spain, will not be subject to the quota, officials have confirmed, but EU companies making cars in China will.
China’s exports of hybrids to the EU tripled to €6.7bn (£5.7bn) in the first half of this year, from €2.2bn a year earlier, according to Chinese customs data. As part of the deal, China has also agreed to drop some tariffs on auto parts and cut duties by half on footwear, olive oil and ice-cream from the EU. Officials stressed that the quota is fully supported by China, and further dialogue on cars and other imports including chemicals, renewable energy and furniture is continuing.
Last month, the EU called for feedback on a new rule that could oblige companies to diversify their supply chains while the“Made in Europe” legislation would do the same in public procurement. On Thursday, EU leaders will discuss a French-German proposal for a “kill switch” or new instrument that would allow Brussels to block access to the single market for certain goods in the event of any harmful development, such as a ban on rare earths crucial for the tech and automotive industries. The deal on hybrid EVs comes amid mounting concern over the £1bn-a-day trade deficit the EU is now running with China.
Up until recently, the EU’s strategy for tackling what it says is an “unsustainable” trade imbalance has been to seek to increase exports to China. Sources said there has been “a paradigm shift” with concerns of deindustrialisation and job losses in the industrial heartlands forcing a renewed focus on curbing imports rather than increasing exports. We know what’s coming in.
We know where there’s a surge, and we know what hits the hardest in terms of our deindustrialisation,” said an official. Andrew Small, the director of the Asia programme at the European Council for Foreign Relations, said China was likely to “suck the EU into drawn-out negotiations” on other sectors but the mood had changed in the EU. My sense is that things have now moved somewhat too far politically,” he said.
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