The EU has taken a decision to impose new and extreme tariffs on electric vehicles made in China. EU members backed a plan to increase the rate from 10% to 45%. The EU argues this plan will prevent cheap Chinese products undercutting European made cars, protecting domestic car manufacturers. This decision symbolises a dramatic moment in the history of the globalisation project. The bloc was established on principles of openness and free trade, but with continued flooding of cheaply produced products into European markets, steps had to be taken to protect domestic industries. EU protectionism is a new phenomenon, but one that was undeniably forced upon them. In the case of car manufacturing, Chinese companies are subsidised by the Chinese state, which allows them to undercut European manufacturers. Free trade is designed to benefit all as long as everyone plays by the same rules. This tariff marks the beginning of a tense time in European-Chinese relationships but symbolises a courageous and ambitious long-term plan that could shift the EU into a stronger position.
Obviously, the short-term price of frustrating China may lead to damaging consequences. China has just announced a tax on European Brandy and organisations such as The Spanish Meat Association have spoken out in concern of the potential negative spillover effect this tariff could have on various industries, such as those that are supported by the pillar that is Chinese consumers. China’s economic reach, despite its dominating and seemingly unavoidable nature, needs to be limited. China’s economic power is propelling the nation to a hegemonic status. This is of concern, as China is a capricious geopolitical actor. It is a totalitarian regime, where human rights abuses are common, but protected and hidden behind a façade of economic necessity.
This is why the EUs first step in challenging their dependency on the Chinese economy is pivotal. It may appear as if the EU is turning inwards in globally unstable times. This is especially demonstrable when the European trade ‘war’ with the US is factored in. It has been placed on a temporary truce, but with the prospect of a second Trump term, and with unpredictability and isolationism generally abounding state-side, Europe may have to take stock of domestic capabilities without the reliability of American trade. Despite the appearance of adopting protectionist policies, 72% of EU imports remain tariff free. The EU is inching closer to a landmark free trade deal with South America. Last year the EU signed a major deal with Kenya. The EU is still open for business, just not for China. For a secure future for Europe, dependence on China needs to be reduced. Just look at the EU and Russia. Russia is waging war on the borders of bloc members and yet trade is still flowing. Russian energy is still powering European cities. An interconnected world provides a plethora of advantages but when Europe is intertwined with rogue and reckless states, it leaves them powerless to effectively respond to hostile actions and leaves them unable to function on their own in the event of major geopolitical developments.
Where does this leave Britain? Britain is at a crossroads. One path consists of exploiting the tenuous China-EU relationship. Heightened free trade with the second largest economy in the world could attract investment in Britain, with companies preferring it compared to the tariffs they would face from producing on the continent. Britain’s market may see cheap products, helping keep prices low, but at what cost? Brexit was centred on the promise of British independence, but we are still at the mercy of one of our greatest adversaries. In a globalised world, independence is an archaic theory, but surrendering any economic control and power that is within our grasp to China is ludicrous. Britain has endless opportunities across the world, we need to start utilising our position on the world stage, creating relationships, and establishing friendships with nations that are aligned with us. That is what the EU are doing, and we need to follow suit. We need to swallow our pride and follow the EU’s lead because they have finally taken a huge step to long term economic security.
Although directing trade efforts to other regions is a net positive, there is work that needs to be done at home, for both Britain and the EU. Easing off Chinese trade will take resilience and mission focus. Europe has undergone drastic deindustrialisation for decades, with the manufacturing sector only contributing 15% of European GDP. Major investment in manufacturing is essential to ensure long term success. Britain needs to cooperate with the EU on these goals. Britain and the EU are major trading partners and compromises on the perils of Brexit and leaving the political despair of the last decade behind us could foster a critical drive to transform the international trade environment. The EU took the courageous first step against Chinese economic dominance; Britain should follow suit.
Image: Flickr/Number 10 (Simon Dawson)
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