(Bloomberg) -- The European Union and China must continue talks to avoid an escalation of protectionist measures that would lead to a “lose-lose” situation for both economies, Spain’s top economic official said.
“We need to keep on negotiating, to keep all avenues for dialogue open to find a negotiated conclusion which is actually valid for both parties,” Economy Minister Carlos Cuerpo told Bloomberg Television. “It’s important not only in terms of being able to protect a key strategic sector going forward, but also thinking medium-term to avoid an escalation of protectionist measures.”
The EU and China, the bloc’s third-largest trading partner, are exchanging tariff threats even as both sides indicate they want to avoid an all-out trade war and stay within World Trade Organization rules. Negotiations on several issues are continuing, with EU countries divided on whether to maintain the status quo or adopt a tougher trade stance against Beijing.
Cuerpo’s remarks come in the wake of China’s announcement that it’s looking into increasing duties on European-made gasoline cars with large engines, following Beijing’s decision to impose the payment of a 39% deposit to EU brandy importers.
That measure, which hurts French producers among others, was introduced in retaliation against an EU decision to impose tariffs as high as 45% for the next five years on the imports of Chinese electric vehicles. On the back of it, Chinese carmaker Chery Automobile Co. has delayed its goal to start producing EVs in Spain by a year, to October 2025.
The EU needs its own perspective and has to “bet for a multilateral rules-based order,” while “avoid being naive,” Cuerpo said in the interview conducted Wednesday on the sidelines of Bloomberg’s Future of Finance summit in Madrid.
The EU’s trade spat with China erupted after the 27-nation bloc decided to increase tariffs, to be imposed from late October, on Chinese electric vehicles, arguing that manufacturers unfairly take advantage of state subsidies and flood Europe with excess production.
The US already has high tariffs on Chinese EVs, making the European market especially important for China’s auto industry.
Last month, Spain suddenly broke ranks with others in the EU on the matter, with Prime Minister Pedro Sanchez openly calling for a reconsideration of the bloc’s decision on new EV tariffs. Sanchez’s stance was then joined by German Chancellor Olaf Scholz.
The Chinese government has also launched anti-dumping investigations into EU exports of dairy and pork products. Any curb of pork shipments would be especially detrimental for Spain, which is a large exporter.
©2024 Bloomberg L.P.