addressing PRC–EU trade frictions with rules and institutions

context: EU duties on PRC EVs (electric vehicles) entered into force on 31 October 2024 for up to five years. The PRC responded by launching three trade investigations on EU ag products.  PRC experts have urged further negotiations and cooperation (e.g. voluntary restrictions and investment cooperation). Connected to broader issues like the reset of global trade rules as a result of robust PRC manufacturing export capacity, addressing the trade dispute may require going beyond the EV sector and delving into longer-term, dispute resolution arrangements between the two blocs via more detailed trade rules and institutions.

The PRC should adopt a non-geopolitical approach to address its trade dispute with the EU in the middle to long term, argues Jian Junbo 简军波 Fudan University Centre for China–EU Relations deputy director and associate professor.

In the short term, notes Jian, the PRC should balance bilateral negotiations with precise countermeasures against the EU's high tariffs. In crafting a strategic response to EU tariffs, Jiang thinks the PRC's approach has to be even-handed and precise to prevent further EU adverse measures while avoiding excessive reactions that may exacerbate tensions.

But in the longer term, a focus should be placed on creating consensus on broader competition rules rather than just focusing on 'smaller' issues like electric vehicle exports. It is only through reaching a consensus in competition rules that the two blocs can address their frictions bilaterally via more institutionalised and regulated means.

Jiang outlines his rationale for why the PRC should engage the EU using a non-geopolitical approach

  • geopolitical rivalry is an obsolete power politics tool associated with zero-sum historical imperialism
    • the modern global economy is interdependent and marked by the need for seeking shared interests, common grounds and mutually beneficial outcomes
  • a non-geopolitical approach is possible and necessary
    • the PRC does not seek outward expansion and hegemony
    • PRC–EU economic interdependence is an effective counterbalance to geopolitical rivalry between the two blocs
      • mutually beneficial outcomes are also in the EU's interests
    • both sides have a shared interest in upholding trade multilateralism via the WTO rules-based system

Jiang sees the PRC–EU electric vehicle trade dispute as a potential catalyst for further reform and cooperation in their bilateral trade relationship, not least via

  • economic and industrial reforms
    • both parties can use the current disputes to promote internal reforms, such as adjusting subsidy policies to foster a fair, mutually beneficial trade environment
  • rule-based dispute resolution
    • encourage the establishment of mechanisms for resolving disputes using bilateral and multilateral frameworks