(Bloomberg) -- The European Union and China will continue negotiations to find an alternative solution to tariffs even if member states vote in the coming days to impose levies on electric vehicles, according to people familiar with the matter.
A provision to allow talks to keep going will be added to draft legislation that member states are now expected to vote on by early next month, said one of the people, who like the others spoke on condition of anonymity. The vote was originally planned for Wednesday, but that timing has slipped slightly after the EU and China agreed to intensify talks.
Following a meeting last week between the bloc’s trade commissioner, Valdis Dombrovskis, and Chinese Commerce Minister Wang Wentao, the EU said the two sides were looking at a mechanism to control prices and volumes of exports to avoid anti-subsidy tariffs.
The EU has so far rejected proposals offered by China. The bloc’s executive arm has frequently said that any solution needs to be in line with WTO rules, address the impact of China’s subsidies and something the EU could monitor for compliance.
China has dismissed the anti-subsidies probe as a protectionist move. In an attempt to lure member states to its corner, Beijing is offering both a carrot of increased investment into car plants — in countries like Spain and Hungary — and the stick of threatening tariffs on dairy, brandy, pork and other products, including cars with large engines.
Officials are confident the bloc has the numbers to pass the tariffs but are wary about making predictions after Spanish Prime Minister Pedro Sanchez spoke out against the levies, and Germany has kept pressing for a deal with Beijing.
“I am not a fan of countervailing duties because this will likely lead to countermeasures and involve us in a tariff dispute, perhaps a tariff war, with China,” German Economy Minister Robert Habeck said in Berlin on Monday. “I am working to find a political solution that will not drive us into a tariff war with China,” he said.
Berlin is leaning toward abstaining, one of the people familiar said. The person cautioned that a formal decision hadn’t been taken as the government had yet to see the final legislation.
Member states are concerned that a rejection would damage the bloc’s credibility on trade policy with Beijing and potentially the US, particularly if Donald Trump wins the upcoming election.
Other member states, including Italy and Denmark, which is one of the biggest suppliers of pork to China, have said they’re in favor of introducing tariffs.
“I don’t want a trade war, but Europe can’t not react when others break the international rules of the game we have,” Danish Prime Minister Mette Frederiksen said in an interview with Bloomberg on Sept. 20 in Copenhagen. “Who is it that started this? In my eyes, it’s not Europe, it’s China. And of course the European Commission and thus the member states must react to it,” she said.
The EU’s upcoming vote would pave the way for duties as high as about 35% to kick in from November for five years unless a qualified majority — 15 member states representing 65% of the the bloc’s population — opposes the move. The new tariffs would be on top of the existing 10% rate.
--With assistance from Michael Nienaber, Sanne Wass and Sara Sjolin.
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