Building tariff castles will only entrench trade war

According to a source at a major UK automaker cited by Politico, “the wheels have started turning” at the United Kingdom’s Department for Business and Trade on an investigation into Chinese State subsidies for its electric vehicle makers.

Some UK automakers have been urging the UK government to launch such a probe with a view to getting protection. They are concerned that the Chinese-made EVs will be diverted to the UK market if the European Union slaps duties on Chinese EV imports when the EU’s own probe wraps up later this year.

Apparently, UK Trade Secretary Kemi Badenoch is preparing to instruct the UK’s trade watchdog, the Trade Remedies Authority, to open an investigation since UK manufacturers “are worried about putting their heads above the parapet” by filing a complaint themselves, the Politico report quoted an unnamed consultant familiar with the plans as saying.

The UK manufacturers are hoping to have their cake and eat it too, as they are prompting the government to close the UK market to Chinese EV makers while they keep access to the Chinese market.

This creates something of a dilemma for the UK government as it is seeking to advance the country’s green transition by accelerating the changeover to greener technologies such as EVs.

In getting the wheels of its trade defense machinery turning, the UK should turn its gaze toward the EU’s anti-subsidy probe which could end up with Germany’s export-led economy becoming the main victim as its automakers are heavily invested in, and exposed to, China, which will be forced to respond should the EU build a defensive castle for its EV industry.

Both the EU and the UK should realize that Chinese EVs can be sold at lower prices not because of government subsidies, but because the Chinese EV makers have higher efficiencies that lower their costs. In the words of Michael Shu, European president of BYD, “we have unique technology … and our management efficiency is high.”

Instead of seeking further protection for their uncompetitiveness, EU and UK companies should sharpen their own technologies and enhance their own efficiency. The German Association of the Automotive Industry has said that relying solely on anti-subsidy inquiries fails to tackle the urgent competitiveness challenges faced by Europe. The UK has already been “supporting” its own domestic EV industry as part of a £4.5 billion investment program for key manufacturing industries.

Any trade protection measures taken against Chinese products will harm normal trade exchanges and hinder efforts to green economies. Only with greater inclusivity and fairness can EVs bring convenience to all.

Editorial, China Daily