China and the EU want to negotiate the planned EU extra tariffs on Chinese electric vehicles – a move that Germany can also partially credit as a success, writes Finn Mayer-Kuckuk.
He accompanied Robert Habeck to China to see how the German Economy Minister attempted to explain to the Chinese side: In this matter, the EU Commission is acting less as a protectionist envious of success – as Beijing likes to portray it – and more as a severely upset trading partner.
The success of these negotiations will also impact the Chinese anti-dumping investigation into European pork imports. Because Beijing wants to send a clear signal with this, John Clarke explains in an interview with Table.Briefings. Until recently, Clarke headed international affairs at the Directorate-General for Agriculture in Brussels and has decades of negotiating experience, including at the World Trade Organisation.
However, Clarke does not believe that the EU and China are on the brink of a trade war: “I don’t think we’re in a trade war just because of three billion euros of pork.” His view, however, is that Beijing’s strategy could also backfire.
German Economy Minister Robert Habeck has been as clear with the Chinese government as Foreign Minister Annalena Baerbock was in April 2023. Even before the conversation turned to specific issues, he sharply criticized China for supporting the Russian war of aggression in Ukraine. “It is also important for China, which is supporting Russia in this war, to understand that German and European security interests are already directly affected by this conflict,” Habeck said in Beijing on Saturday in the rooms of the National Development and Reform Commission. Europe and Germany wouldn’t be reducing their dependency on China for raw materials and critical goods if Beijing didn’t support Russia’s war.
Habeck was able to score a victory for himself on Saturday evening: China and the EU Commission agreed to start negotiations on how to deal with the extra tariffs that the EU could impose on Chinese electric cars. Trade Commissioner Valdis Dombrovskis made this clear in a video call with Trade Minister Wang Wentao on Saturday afternoon.
Habeck stepped in front of the press with a mixture of modesty and pride after China had agreed to the negotiations. He said that as German trade minister, he had done what he could to contribute to the start of the talks. However, he stressed that this was a coordinated joint effort with the EU. Although the start of negotiations was an important first step, it was no guarantee that an agreement would be reached, he added.
The negotiations are part of the EU’s decision on the extra tariffs: Effective July 4, the EU will levy temporary import tariffs. Importers will not have to pay anything until November, at which point the tariffs will be deducted. This is also the deadline for negotiating a solution with China. The fact that both sides now want to talk is seen as a positive signal.
The German automotive industry never tires of stressing its opposition to extra tariffs. In his role as a representative of the German economy, Habeck also said that his main goal was open markets and free exports. China’s subsidies had made it necessary for the EU to act. He openly represented this position. He did not come across as a supplicant, but as an angry trading partner who clearly explained the reasons for his discontent.
On his China visit, he tried to combine two initially contradictory positions:
By ranting a bit and explaining a lot in Beijing, Habeck hopes to have contributed to the start of negotiations. In the best-case scenario, the extra tariffs could become obsolete before importers even have to pay a single euro.
In the overall picture of the statements, Habeck has sent a message: The EU will not be divided after all. China now has no choice but to negotiate with Brussels on how to proceed with trade. Instead of deflecting the situation by putting pressure on Germany, the largest member state, concrete offers are needed in talks with the EU to resolve the situation. However, Habeck was reluctant to name these possible quid pro quos or possible solutions. He said it is the task of the EU to hold negotiations on behalf of all 27 member states.
Earlier, China’s planning minister, Zheng Shanjie, announced a clear response to the EU’s extra EV tariffs. “We will do everything to protect Chinese companies.” At the same time, he held out the prospect of rewards in return for German support for China’s position in the ongoing trade dispute. “We have realized that the German side rejects the EU’s policy. We appreciate that.”
However, during the talks in Beijing, Habeck refused to position himself against the EU. While Zheng called the measure “punitive tariffs,” Habeck reiterated that it was a matter of differentiated countervailing duties for China’s subsidies. If there is no agreement, “it will not be possible to prevent the tariffs from coming into force.” In other words: China must offer something good in return if it wants to avert the tariffs. So Habeck uses the tariffs to give Germany and the EU room for negotiation. He is aware that China urgently needs the EU as an open market.
Minister Zheng rejected the claim that Chinese car manufacturers were practicing price dumping. He said that they sold their cars at higher prices overseas than in China. And: “The price advantage of the Chinese car industry is based on market principles, not on subsidies.”
The first statement is generally undisputed: China manufactures at such low prices that its cars are launched in Europe below the price of its European competitors but still above the Chinese market price. Over 75 brands are engaged in a destructive discount battle in its domestic market. However, dumping would only occur if the product is sold below the price on the market of origin. Dumping was never the issue.
As far as subsidies are concerned, the EU has tried to quantify the provinces’ subsidies for their local car manufacturers and set tariffs based on the results of its investigation.
However, Minister Zheng also generally rejected the accusation that China was breeding overcapacity. “In the Western world, there is talk of renewable energy technology overcapacity here in China. This statement is absurd.” In reality, consumers in the EU would benefit from the low prices of imported goods. He added that rejecting imports was not in line with the European goal of green development. Chinese EVs would make a contribution to reducing carbon emissions.
Habeck tried to explain the reasons for the tariffs: He said that the problem was not good and cheap production in China, but artificially low prices due to subsidies, which nobody can compete with in honest competition. He said that nobody was interested in tariffs, least of all Germany, which was keen to face up to the competition.
Habeck even disagreed with Zheng in an area usually characterized by pleasant-sounding phrases about mutual cooperation. After Zheng justified the expansion of coal-fired power plants as a side effect of the energy transition to secure the base load, Habeck dismissed this argument, saying that it was more expensive and inefficient not to rely exclusively on renewables.
Habeck followed up with a general reminder to fight climate change. He rejected Zheng’s argument that Western countries had been emitting carbon dioxide for much longer, giving them an advantage. “You can’t hide behind historical responsibility. China’s carbon emissions must be reduced quickly.”
Minister Zheng, who heads China’s Policy Planning Department, is a powerful member of the cabinet and was Habeck’s most important dialogue partner on Saturday. On Friday, China’s Premier Li Qiang stood up Habeck. He canceled a previously scheduled meeting.
By speaking of “German security interests” right at the start, Habeck borrowed a Chinese formula. China repeatedly justifies its own, more aggressive territorial policy, for example, in the South China Sea, by referring to its “security interests” or “core interests“, which also justify harsh actions. Foreign Minister Baerbock also spoke of Germany’s core interests during her visit.
During her talks in Beijing last year, Baerbock campaigned for China to reduce its support for Russia and help end the war. She also clearly formulated criticism of China’s human rights violations. Baerbock’s supposedly undiplomatic approach sparked criticism, with some claiming that she was stifling dialogue.
Habeck visibly attempted to use the Chinese worldview to explain Germany’s concerns, using language that was compatible with China. This included defining the Russian attack on Ukraine as a threat to a core European interest rather than a mere border war.
He repeatedly stated that the war is the reason why trade between the EU and China is so strained at the moment. According to his statement, the critical examination of exports, the focus on reducing dependencies, and a general deterioration in the climate can be traced back to the war. In other words, he highlighted the material damage that the Russian attack is causing China. According to Habeck, this will not be offset in the long term by increasing trade with Russia. After all, the EU is still a much larger and richer market.
His remarks on supply chains and human rights were similar. Instead of making moral appeals, he approached the topic from a trade perspective, saying supply chain laws would force European companies to avoid imports from production with child and forced labor and poor working conditions. “China’s trading partners must adapt to this,” he told the Chinese media at his press conference on Saturday afternoon. With these clear words, he was delivering a counter-program to Olaf Scholz’s more amicable visit in April.
However, there was a similarity to Scholz’s visit towards the end of the four-day trip, when Habeck met with students at Zhejiang University. Here, too, as with Scholz two months earlier, there is the question of how spontaneous the students’ questions to the guest from Germany really were and whether those present and their appearance were not being staged based on propaganda criteria.
Why did Beijing target the pork industry specifically? What’s the strategy behind that?
They want to send a clear signal, a warning that, if the EU does not negotiate on the electric vehicle duties, China will put anti-dumping duties on pork. They chose pork because it is the biggest agricultural export from the EU to China. And therefore it is politically quite visible. Even though agriculture is only a very small part of the EU’s total exports to China, it is politically very visible in the EU, and it draws attention to the problem. Earlier on, Beijing threatened to possibly target dairy products, wine and even Airbus.
Why didn’t they go for that?
I’m surprised that they didn’t target wine. Because a lot of the wine comes from France, and France was behind the electric vehicle case, pushing for it. But maybe that sector was too obvious, and in any case, they already targeted primarily French spirits. When it comes to dairy, the EU does not export so much to China. It does export infant formula, which the Chinese really need. So, pork is a quite convenient one. We are looking at three billion euros of exports. It is not going to change the world, and in my view, it does not amount to a trade war. China has chosen to investigate this sector because it can cause some damage and alert three or four member states to the EV case, but not massive damage or lead to a trade war. So they chose the value of the sector quite carefully.
Do you think that it is a good strategy on their part?
I have mixed feelings about this. I think it is a good strategy if the signal is ‘We want to negotiate,’ which I think is their intention. It is not revenge.
And will that work?
Maybe. The countries affected by this would be Spain, Netherlands and Denmark as the three big exporters. None of them seem to have particularly strong vested interests in the EV issue. I guess targeting their pork exports will make them inclined to tell the Commission please negotiate on EVs, but it will not have a dramatic effect on the case. Whereas, the country which was most pushing for duties on electric vehicles was France. If Beijing wanted to retaliate or have maximum leverage in any future negotiations, they would have been better off targeting products from France or Germany, which are the ones that make the decisions in the EU basically. So in that respect, it is not a brilliant strategy.
Beijing will rather create problems for itself?
I see two issues: One is, in the long term, it is not very wise to put tariffs on food and commodities because, from a food security point of view, it is a rather dangerous approach to reduce your sources of supply. The second one: This anti-dumping investigation that China has launched, was clearly done for political reasons. There is no credible dumping of pork into China. That really undermines China’s credibility when, at the same time, it is claiming or pretending to be committed to multilateralism and following, very faithfully, WTO rules. The fact that they introduce this investigation for political reasons, undermines their narrative completely. They are doing themselves some damage in the long term, as well as reputational damage.
You mentioned that the pork sector may be carefully chosen to facilitate negotiations rather than escalating. Both sides agreed on Saturday to start negotiations. How likely do you think it is that this conflict will be resolved through negotiations?
The EU regulation and policy on anti-subsidy do give some scope for negotiation. If the Chinese companies cooperate with the investigation, that can lead to a much lower anti-subsidy duty. And if the Chinese government cooperates in explaining what the subsidies are or are not, that would also be helpful.
The EU can also choose to look at the broader public interest – there is a public interest test in EU trade defense legislation. Is it in our interest as the European society or economy to put a tax on Chinese electric vehicles – yes or no? And if, at the end of the day, the Commission and the member states decide that we need affordable Chinese green technology to help the net-zero target and the green transition, they can decide not to tax these imports too high because we need this for the green transition. So there is considerable scope for negotiation. I don’t think we’re in a trade war just because of three billion euros of pork. In any case, for the time being, it’s just an investigation by China and not actually the imposition of any duties yet.
How likely is it that the investigation will actually be followed up with actions, like tariffs on pork?
It will depend on the discussion about the electric vehicle case. If there is no sign of scope for negotiation with China; or if the Chinese companies do not cooperate in the EU investigation, then I’m quite sure the Chinese will put duties on pork. Beijing also made a very vague claim – with no evidence so far – that there is also illegal subsidization going on in Europe for the pork sector. So they can also try to put countervailing duties on the subsidies. I am sure that they will do so if they are not satisfied with the result for electric vehicles. If only because they would lose face otherwise.
What impact would the pork duties have on the EU market? And which ones on China? You have already mentioned that some agricultural foodstuffs are difficult to procure there
It will have some impact on the Chinese market in the short to medium term because China needs these products. Quite a lot of the European exports, things like the heads, the trotters, the feet are not used in Europe but the Chinese buy them. That also means, to have a supply of those parts, you have to produce the whole pig. And China may not have the consumer capacity to absorb all the meat if it is produced domestically.
It also means there will be some overcapacity in Europe temporarily, if the Chinese market is closed to European exports. But the experience we have had over the last few years has suggested that the pork industry is quite able to redirect their trade and diversify their markets. That has been the experience of recent years following, for example, when Germany was locked out of the Chinese market due to ASF in Germany. They were able to really send the pork to new destinations after a few months.
Could the EU appeal at the World Trade Organisation, since the WTO is a bit toothless currently?
If the EU found that China’s anti-dumping measures were incompatible with China’s WTO obligations, then, of course, the EU could take China to the WTO. The EU will decide on that based on a number of criteria. First, is there a lot of money involved? Secondly, is there a systemic problem that we need to fix? And thirdly, are we likely to win the case? If the EU is convinced it can win the case, and if it’s either a systemic case or it’s one with significant commercial implications, then it may well go forward to use the WTO dispute settlement system. But it works very slowly. It takes a couple of years between launching a case and its conclusion. In the meantime, the duties remain in place. It is not the ideal solution. What often happens in such situations is that a WTO member threatens Dispute Settlement Understanding and enters into consultations with the other country to see if a compromise can be found that would obviate the need to go the whole way and launch a dispute. And it would probably in this situation be in China’s interest not to have its Anti-Dumping legislation systemically found incompatible with WTO rules.
John Clarke is the former Director for International Relations at DG Agriculture in the European Commission. He was previously Head of the EU Delegation to the WTO and the UN in Geneva. He joined the European Commission in 1993 as a trade negotiator.
China launched the Belt and Road Initiative in 2013. Since then, and especially since China adopted a stronger – and from a Western perspective more controversial – geopolitical position in recent years, there have been heated debates in many Western countries questioning China’s motives for foreign direct investment – and its potential economic impact on the recipient country.
In Germany, for instance, this was evident in the discussion surrounding the possible participation of the Chinese shipping company Cosco in a container terminal at the port of Hamburg. The German government, in tandem with the EU, responded to the increased interest of Chinese companies in investments by tightening up investment screening.
Western observers are also often critical of Chinese investments in other parts of the world. The main focus of discussion is Africa, a continent with strong economic potential and large mineral resource reserves.
Overall, foreign direct investment (FDI) in Africa is low. In 2022, the volume of FDI in the continent’s 54 countries was around one trillion US dollars, according to the United Nations World Investment Report. Roughly as much as the volume in a single European country: Germany. The share of Chinese investments in Africa is quite significant – in 2022, it accounted for around four percent of all new investments and was already significantly higher in previous years, at around eleven percent in 2020.
Foreign direct investment can positively impact companies and thus jobs in the recipient country, especially if it leads to a successful transfer of knowledge and technology. At least, that’s what economic theory says, backed up by empirical studies. Are Chinese investors different from other investors in this respect? Unfortunately, the available data is still limited. However, results from a survey of foreign companies in Ghana conducted in 2022 provide initial evidence.
Chinese companies tend to be smaller than other foreign companies. While foreign companies have a high proportion of local employees on average (over 85 percent), this proportion is lower in Chinese companies. This mainly concerns highly qualified employees such as managers, who more often come from their home country at Chinese companies than at companies from other countries.
Does this have implications for the use of and access to technology? The picture here is not entirely clear. Around a quarter of all foreign companies state that they invest in research and development, own patents, or have introduced new technologies in Ghana. This applies equally to Chinese and other companies. Chinese companies have more local suppliers but, in contrast to other companies, are less likely to transfer technology to these suppliers – although only around five percent of all companies state that they transfer technology to suppliers at all.
Technology transfer to corporate customers is much higher, with around one-third of all foreign companies reporting that they interact with their customers this way. There is no difference between Chinese and other companies here. Finally, Chinese companies score points because they are more likely to transfer modern management methods to local companies – in other words, they support the development of leadership qualities in Ghanaian companies.
It thus emerges that Chinese companies are generally by no means “worse, but also not “better” than other foreign investors in Ghana. There is little difference in many respects. This makes it all the more important to consider this in the sometimes very “overheated” discussions and debates about Chinese investments.
This article is part of the “Global China Conversations” event series of the Kiel Institute for the World Economy (IfW). On Thursday (June 27, 2024; 11 a.m. CEST), Holger Goerg, Reginald Yofi Grant, CEO of the Ghana Investment Promotion Center, and Hong Zhao, Associate Professor at Nankai University, will discuss the topic “How (differently) have Chinese companies invested in and changed Africa?“. China.Table is media partner of this event series.
Yoga is also very popular in China. It is estimated that around ten million Chinese practice asanas and sun salutations regularly. Part of the reason for the popularity may be that the poses are ideal for aesthetic social media posts. On World Yoga Day on 21 June, this group of yogis from Taizhou were photographed doing the proverbial lotus pose.
China and the EU want to negotiate the planned EU extra tariffs on Chinese electric vehicles – a move that Germany can also partially credit as a success, writes Finn Mayer-Kuckuk.
He accompanied Robert Habeck to China to see how the German Economy Minister attempted to explain to the Chinese side: In this matter, the EU Commission is acting less as a protectionist envious of success – as Beijing likes to portray it – and more as a severely upset trading partner.
The success of these negotiations will also impact the Chinese anti-dumping investigation into European pork imports. Because Beijing wants to send a clear signal with this, John Clarke explains in an interview with Table.Briefings. Until recently, Clarke headed international affairs at the Directorate-General for Agriculture in Brussels and has decades of negotiating experience, including at the World Trade Organisation.
However, Clarke does not believe that the EU and China are on the brink of a trade war: “I don’t think we’re in a trade war just because of three billion euros of pork.” His view, however, is that Beijing’s strategy could also backfire.
German Economy Minister Robert Habeck has been as clear with the Chinese government as Foreign Minister Annalena Baerbock was in April 2023. Even before the conversation turned to specific issues, he sharply criticized China for supporting the Russian war of aggression in Ukraine. “It is also important for China, which is supporting Russia in this war, to understand that German and European security interests are already directly affected by this conflict,” Habeck said in Beijing on Saturday in the rooms of the National Development and Reform Commission. Europe and Germany wouldn’t be reducing their dependency on China for raw materials and critical goods if Beijing didn’t support Russia’s war.
Habeck was able to score a victory for himself on Saturday evening: China and the EU Commission agreed to start negotiations on how to deal with the extra tariffs that the EU could impose on Chinese electric cars. Trade Commissioner Valdis Dombrovskis made this clear in a video call with Trade Minister Wang Wentao on Saturday afternoon.
Habeck stepped in front of the press with a mixture of modesty and pride after China had agreed to the negotiations. He said that as German trade minister, he had done what he could to contribute to the start of the talks. However, he stressed that this was a coordinated joint effort with the EU. Although the start of negotiations was an important first step, it was no guarantee that an agreement would be reached, he added.
The negotiations are part of the EU’s decision on the extra tariffs: Effective July 4, the EU will levy temporary import tariffs. Importers will not have to pay anything until November, at which point the tariffs will be deducted. This is also the deadline for negotiating a solution with China. The fact that both sides now want to talk is seen as a positive signal.
The German automotive industry never tires of stressing its opposition to extra tariffs. In his role as a representative of the German economy, Habeck also said that his main goal was open markets and free exports. China’s subsidies had made it necessary for the EU to act. He openly represented this position. He did not come across as a supplicant, but as an angry trading partner who clearly explained the reasons for his discontent.
On his China visit, he tried to combine two initially contradictory positions:
By ranting a bit and explaining a lot in Beijing, Habeck hopes to have contributed to the start of negotiations. In the best-case scenario, the extra tariffs could become obsolete before importers even have to pay a single euro.
In the overall picture of the statements, Habeck has sent a message: The EU will not be divided after all. China now has no choice but to negotiate with Brussels on how to proceed with trade. Instead of deflecting the situation by putting pressure on Germany, the largest member state, concrete offers are needed in talks with the EU to resolve the situation. However, Habeck was reluctant to name these possible quid pro quos or possible solutions. He said it is the task of the EU to hold negotiations on behalf of all 27 member states.
Earlier, China’s planning minister, Zheng Shanjie, announced a clear response to the EU’s extra EV tariffs. “We will do everything to protect Chinese companies.” At the same time, he held out the prospect of rewards in return for German support for China’s position in the ongoing trade dispute. “We have realized that the German side rejects the EU’s policy. We appreciate that.”
However, during the talks in Beijing, Habeck refused to position himself against the EU. While Zheng called the measure “punitive tariffs,” Habeck reiterated that it was a matter of differentiated countervailing duties for China’s subsidies. If there is no agreement, “it will not be possible to prevent the tariffs from coming into force.” In other words: China must offer something good in return if it wants to avert the tariffs. So Habeck uses the tariffs to give Germany and the EU room for negotiation. He is aware that China urgently needs the EU as an open market.
Minister Zheng rejected the claim that Chinese car manufacturers were practicing price dumping. He said that they sold their cars at higher prices overseas than in China. And: “The price advantage of the Chinese car industry is based on market principles, not on subsidies.”
The first statement is generally undisputed: China manufactures at such low prices that its cars are launched in Europe below the price of its European competitors but still above the Chinese market price. Over 75 brands are engaged in a destructive discount battle in its domestic market. However, dumping would only occur if the product is sold below the price on the market of origin. Dumping was never the issue.
As far as subsidies are concerned, the EU has tried to quantify the provinces’ subsidies for their local car manufacturers and set tariffs based on the results of its investigation.
However, Minister Zheng also generally rejected the accusation that China was breeding overcapacity. “In the Western world, there is talk of renewable energy technology overcapacity here in China. This statement is absurd.” In reality, consumers in the EU would benefit from the low prices of imported goods. He added that rejecting imports was not in line with the European goal of green development. Chinese EVs would make a contribution to reducing carbon emissions.
Habeck tried to explain the reasons for the tariffs: He said that the problem was not good and cheap production in China, but artificially low prices due to subsidies, which nobody can compete with in honest competition. He said that nobody was interested in tariffs, least of all Germany, which was keen to face up to the competition.
Habeck even disagreed with Zheng in an area usually characterized by pleasant-sounding phrases about mutual cooperation. After Zheng justified the expansion of coal-fired power plants as a side effect of the energy transition to secure the base load, Habeck dismissed this argument, saying that it was more expensive and inefficient not to rely exclusively on renewables.
Habeck followed up with a general reminder to fight climate change. He rejected Zheng’s argument that Western countries had been emitting carbon dioxide for much longer, giving them an advantage. “You can’t hide behind historical responsibility. China’s carbon emissions must be reduced quickly.”
Minister Zheng, who heads China’s Policy Planning Department, is a powerful member of the cabinet and was Habeck’s most important dialogue partner on Saturday. On Friday, China’s Premier Li Qiang stood up Habeck. He canceled a previously scheduled meeting.
By speaking of “German security interests” right at the start, Habeck borrowed a Chinese formula. China repeatedly justifies its own, more aggressive territorial policy, for example, in the South China Sea, by referring to its “security interests” or “core interests“, which also justify harsh actions. Foreign Minister Baerbock also spoke of Germany’s core interests during her visit.
During her talks in Beijing last year, Baerbock campaigned for China to reduce its support for Russia and help end the war. She also clearly formulated criticism of China’s human rights violations. Baerbock’s supposedly undiplomatic approach sparked criticism, with some claiming that she was stifling dialogue.
Habeck visibly attempted to use the Chinese worldview to explain Germany’s concerns, using language that was compatible with China. This included defining the Russian attack on Ukraine as a threat to a core European interest rather than a mere border war.
He repeatedly stated that the war is the reason why trade between the EU and China is so strained at the moment. According to his statement, the critical examination of exports, the focus on reducing dependencies, and a general deterioration in the climate can be traced back to the war. In other words, he highlighted the material damage that the Russian attack is causing China. According to Habeck, this will not be offset in the long term by increasing trade with Russia. After all, the EU is still a much larger and richer market.
His remarks on supply chains and human rights were similar. Instead of making moral appeals, he approached the topic from a trade perspective, saying supply chain laws would force European companies to avoid imports from production with child and forced labor and poor working conditions. “China’s trading partners must adapt to this,” he told the Chinese media at his press conference on Saturday afternoon. With these clear words, he was delivering a counter-program to Olaf Scholz’s more amicable visit in April.
However, there was a similarity to Scholz’s visit towards the end of the four-day trip, when Habeck met with students at Zhejiang University. Here, too, as with Scholz two months earlier, there is the question of how spontaneous the students’ questions to the guest from Germany really were and whether those present and their appearance were not being staged based on propaganda criteria.
Why did Beijing target the pork industry specifically? What’s the strategy behind that?
They want to send a clear signal, a warning that, if the EU does not negotiate on the electric vehicle duties, China will put anti-dumping duties on pork. They chose pork because it is the biggest agricultural export from the EU to China. And therefore it is politically quite visible. Even though agriculture is only a very small part of the EU’s total exports to China, it is politically very visible in the EU, and it draws attention to the problem. Earlier on, Beijing threatened to possibly target dairy products, wine and even Airbus.
Why didn’t they go for that?
I’m surprised that they didn’t target wine. Because a lot of the wine comes from France, and France was behind the electric vehicle case, pushing for it. But maybe that sector was too obvious, and in any case, they already targeted primarily French spirits. When it comes to dairy, the EU does not export so much to China. It does export infant formula, which the Chinese really need. So, pork is a quite convenient one. We are looking at three billion euros of exports. It is not going to change the world, and in my view, it does not amount to a trade war. China has chosen to investigate this sector because it can cause some damage and alert three or four member states to the EV case, but not massive damage or lead to a trade war. So they chose the value of the sector quite carefully.
Do you think that it is a good strategy on their part?
I have mixed feelings about this. I think it is a good strategy if the signal is ‘We want to negotiate,’ which I think is their intention. It is not revenge.
And will that work?
Maybe. The countries affected by this would be Spain, Netherlands and Denmark as the three big exporters. None of them seem to have particularly strong vested interests in the EV issue. I guess targeting their pork exports will make them inclined to tell the Commission please negotiate on EVs, but it will not have a dramatic effect on the case. Whereas, the country which was most pushing for duties on electric vehicles was France. If Beijing wanted to retaliate or have maximum leverage in any future negotiations, they would have been better off targeting products from France or Germany, which are the ones that make the decisions in the EU basically. So in that respect, it is not a brilliant strategy.
Beijing will rather create problems for itself?
I see two issues: One is, in the long term, it is not very wise to put tariffs on food and commodities because, from a food security point of view, it is a rather dangerous approach to reduce your sources of supply. The second one: This anti-dumping investigation that China has launched, was clearly done for political reasons. There is no credible dumping of pork into China. That really undermines China’s credibility when, at the same time, it is claiming or pretending to be committed to multilateralism and following, very faithfully, WTO rules. The fact that they introduce this investigation for political reasons, undermines their narrative completely. They are doing themselves some damage in the long term, as well as reputational damage.
You mentioned that the pork sector may be carefully chosen to facilitate negotiations rather than escalating. Both sides agreed on Saturday to start negotiations. How likely do you think it is that this conflict will be resolved through negotiations?
The EU regulation and policy on anti-subsidy do give some scope for negotiation. If the Chinese companies cooperate with the investigation, that can lead to a much lower anti-subsidy duty. And if the Chinese government cooperates in explaining what the subsidies are or are not, that would also be helpful.
The EU can also choose to look at the broader public interest – there is a public interest test in EU trade defense legislation. Is it in our interest as the European society or economy to put a tax on Chinese electric vehicles – yes or no? And if, at the end of the day, the Commission and the member states decide that we need affordable Chinese green technology to help the net-zero target and the green transition, they can decide not to tax these imports too high because we need this for the green transition. So there is considerable scope for negotiation. I don’t think we’re in a trade war just because of three billion euros of pork. In any case, for the time being, it’s just an investigation by China and not actually the imposition of any duties yet.
How likely is it that the investigation will actually be followed up with actions, like tariffs on pork?
It will depend on the discussion about the electric vehicle case. If there is no sign of scope for negotiation with China; or if the Chinese companies do not cooperate in the EU investigation, then I’m quite sure the Chinese will put duties on pork. Beijing also made a very vague claim – with no evidence so far – that there is also illegal subsidization going on in Europe for the pork sector. So they can also try to put countervailing duties on the subsidies. I am sure that they will do so if they are not satisfied with the result for electric vehicles. If only because they would lose face otherwise.
What impact would the pork duties have on the EU market? And which ones on China? You have already mentioned that some agricultural foodstuffs are difficult to procure there
It will have some impact on the Chinese market in the short to medium term because China needs these products. Quite a lot of the European exports, things like the heads, the trotters, the feet are not used in Europe but the Chinese buy them. That also means, to have a supply of those parts, you have to produce the whole pig. And China may not have the consumer capacity to absorb all the meat if it is produced domestically.
It also means there will be some overcapacity in Europe temporarily, if the Chinese market is closed to European exports. But the experience we have had over the last few years has suggested that the pork industry is quite able to redirect their trade and diversify their markets. That has been the experience of recent years following, for example, when Germany was locked out of the Chinese market due to ASF in Germany. They were able to really send the pork to new destinations after a few months.
Could the EU appeal at the World Trade Organisation, since the WTO is a bit toothless currently?
If the EU found that China’s anti-dumping measures were incompatible with China’s WTO obligations, then, of course, the EU could take China to the WTO. The EU will decide on that based on a number of criteria. First, is there a lot of money involved? Secondly, is there a systemic problem that we need to fix? And thirdly, are we likely to win the case? If the EU is convinced it can win the case, and if it’s either a systemic case or it’s one with significant commercial implications, then it may well go forward to use the WTO dispute settlement system. But it works very slowly. It takes a couple of years between launching a case and its conclusion. In the meantime, the duties remain in place. It is not the ideal solution. What often happens in such situations is that a WTO member threatens Dispute Settlement Understanding and enters into consultations with the other country to see if a compromise can be found that would obviate the need to go the whole way and launch a dispute. And it would probably in this situation be in China’s interest not to have its Anti-Dumping legislation systemically found incompatible with WTO rules.
John Clarke is the former Director for International Relations at DG Agriculture in the European Commission. He was previously Head of the EU Delegation to the WTO and the UN in Geneva. He joined the European Commission in 1993 as a trade negotiator.
China launched the Belt and Road Initiative in 2013. Since then, and especially since China adopted a stronger – and from a Western perspective more controversial – geopolitical position in recent years, there have been heated debates in many Western countries questioning China’s motives for foreign direct investment – and its potential economic impact on the recipient country.
In Germany, for instance, this was evident in the discussion surrounding the possible participation of the Chinese shipping company Cosco in a container terminal at the port of Hamburg. The German government, in tandem with the EU, responded to the increased interest of Chinese companies in investments by tightening up investment screening.
Western observers are also often critical of Chinese investments in other parts of the world. The main focus of discussion is Africa, a continent with strong economic potential and large mineral resource reserves.
Overall, foreign direct investment (FDI) in Africa is low. In 2022, the volume of FDI in the continent’s 54 countries was around one trillion US dollars, according to the United Nations World Investment Report. Roughly as much as the volume in a single European country: Germany. The share of Chinese investments in Africa is quite significant – in 2022, it accounted for around four percent of all new investments and was already significantly higher in previous years, at around eleven percent in 2020.
Foreign direct investment can positively impact companies and thus jobs in the recipient country, especially if it leads to a successful transfer of knowledge and technology. At least, that’s what economic theory says, backed up by empirical studies. Are Chinese investors different from other investors in this respect? Unfortunately, the available data is still limited. However, results from a survey of foreign companies in Ghana conducted in 2022 provide initial evidence.
Chinese companies tend to be smaller than other foreign companies. While foreign companies have a high proportion of local employees on average (over 85 percent), this proportion is lower in Chinese companies. This mainly concerns highly qualified employees such as managers, who more often come from their home country at Chinese companies than at companies from other countries.
Does this have implications for the use of and access to technology? The picture here is not entirely clear. Around a quarter of all foreign companies state that they invest in research and development, own patents, or have introduced new technologies in Ghana. This applies equally to Chinese and other companies. Chinese companies have more local suppliers but, in contrast to other companies, are less likely to transfer technology to these suppliers – although only around five percent of all companies state that they transfer technology to suppliers at all.
Technology transfer to corporate customers is much higher, with around one-third of all foreign companies reporting that they interact with their customers this way. There is no difference between Chinese and other companies here. Finally, Chinese companies score points because they are more likely to transfer modern management methods to local companies – in other words, they support the development of leadership qualities in Ghanaian companies.
It thus emerges that Chinese companies are generally by no means “worse, but also not “better” than other foreign investors in Ghana. There is little difference in many respects. This makes it all the more important to consider this in the sometimes very “overheated” discussions and debates about Chinese investments.
This article is part of the “Global China Conversations” event series of the Kiel Institute for the World Economy (IfW). On Thursday (June 27, 2024; 11 a.m. CEST), Holger Goerg, Reginald Yofi Grant, CEO of the Ghana Investment Promotion Center, and Hong Zhao, Associate Professor at Nankai University, will discuss the topic “How (differently) have Chinese companies invested in and changed Africa?“. China.Table is media partner of this event series.
Yoga is also very popular in China. It is estimated that around ten million Chinese practice asanas and sun salutations regularly. Part of the reason for the popularity may be that the poses are ideal for aesthetic social media posts. On World Yoga Day on 21 June, this group of yogis from Taizhou were photographed doing the proverbial lotus pose.
