A trade war is looming between Washington, Brussels and Beijing over key sectors of the ecological transition. In recent months the European Commission has raised the level of the conflict, with Margrethe Vestager, deputy of Ursula von der Leyen, accusing the Chinese government of “jeopardizing the economic security” of the Old Continent with its export policy. After the duties on solar panels and the investigation into electric cars, the EU executive has launched a new investigation in recent days which focuses on the large Chinese subsidies given to some wind turbine manufacturers. From the stage at Princeton University, Vestager described China not as a partner of the European Union but as an “economic competitor” and a “systemic rival”.
The “systematic defense” against Chinese subsidies
The EU investigation into Chinese subsidies to electric car manufacturers was launched in October 2023 and is expected to end in July this year, with the European Commission saying it is ready to “impose remedies”, which could involve adoption of trade duties. Beyond individual investigations, Vestager hoped for the adoption of a “systematic defense” by Brussels against European companies damaged by Beijing’s incorrect behavior. “We cannot afford to see what happened with solar panels repeat itself for electric vehicles, wind turbines or microchips,” attacked the European commissioner from the United States. The reference is to the total market imbalance that has been created in the photovoltaic systems supply chain, largely controlled by the Asian country. Suffice it to say, Vestager underlined, that “less than 3% of the solar panels installed in Europe are produced within our borders”. What Brussels is trying to avoid at all costs is that the same situation is repeated in other key sectors of the ecological transition, starting with electric cars and wind turbines.
The American side
The words uttered by Vestager seem to echo in some way the statements of the American Treasury Secretary, Janet Yellen, who visited China in recent days. The Beijing government’s direct and indirect public support for its companies “is leading to a production capacity that significantly exceeds internal demand” and represents “a risk to global economic resilience”, warned the Treasury secretary. Yellen therefore hoped for the achievement of “a healthy economic relationship” between Beijing and Washington, but she also asked the Chinese government to “guarantee a level playing field for businesses and workers in both countries”.
Beijing’s response
Wang Wentao, Chinese Minister of Commerce, rejected all accusations, specifying that Beijing’s advantage in the electric vehicle sector is not due to production overcapacity but to the “rapid development of the sector, which is the result of innovation, industrial efficiency and from the supply chain». Regarding the investigations into subsidies launched by the European Union, Beijing speaks of an obstacle to “mutually beneficial cooperation” between the two countries but also to global efforts against climate change. “I believe that the outside world is concerned about the growing tendencies of the EU’s protectionist policies, and China is greatly concerned about the discriminatory measures taken by the European side against Chinese companies and even against the entire industrial sector,” Mao Ning added. , spokesperson for the Ministry of Foreign Affairs.
All the numbers on Chinese maxi-subsidies
A report by the Kiel Institute published in recent days sheds light on the phenomenon of state aid provided by China. According to the German institute, the public subsidies provided by Beijing are three to nine times higher than those of other OECD countries such as the United States and Germany. Between 2018 and 2022, for example, the automotive giant BYD was able to count on at least 3.4 billion euros in direct public subsidies, to which are added incentives for the purchase of new cars (1.6 billion only in 2022). According to the Kiel Institute, “99% of publicly listed Chinese companies received direct government subsidies in 2022.” Money that is used to advance research into the key technologies of the ecological transition, but also to give priority access to raw materials or some public contracts. According to European industrialists, China has built its dominance on prices kept low thanks to massive state aid. The Kiel Institute report, however, warns against overly aggressive reactions from the European Union. Without technologies imported from China, the German institute warns, the key products of the ecological transition started by Brussels would become more expensive and scarcer.
On the cover: The President of the European Commission, Ursula von der Leyen, at the EU-China summit on 1 April 2022 in Brussels (EPA/Olivier Hoslet)
