US hidden agenda in EV sector unmasked

China's electric vehicle (EV) industry has come under intense scrutiny, with the United States and the European Union deciding to launch investigations into Chinese-made EVs to determine whether they pose a threat to national security. Ostensibly projected as efforts to promote fair competition and safeguard national security, such investigations suggest the US has a hidden agenda rooted in protectionism and strategic apprehension.

The US claims that China's EV sector is plagued by overcapacity, and the Chinese government gives unfair subsidies to EV manufacturers (as well as buyers). However, such accusations are unfounded, divorced from reality, and those leveling such accusations overlook the dynamic nature of capacity building inherent in rapidly evolving industries. Also, those accusing China of giving price subsidies fail to acknowledge the market dynamics and technological prowess that underpin China's competitive edge. Independent analyses have consistently shown the efficiency and cost-effectiveness of Chinese EVs, dispelling the narrative of unfair advantage.

Chinese-made EVs are highly cost-effective because of China's efficient supply chains, technological prowess and market dynamics, rather than subsidies and/or dumping policy. A comprehensive analysis by UBS shows that the overall cost of EV-maker BYD's Dolphin model is 35 percent lower than that of similar models manufactured by Volkswagen in Europe.

Besides, China's low export rate for EVs indicates domestic consumers comprise the main market for Chinese-made EVs, and the penetration of EVs in the overall automobile market is still relatively low. More important, if market share alone is used as a criterion to determine whether there is overcapacity in a certain industry of a country, then Germany's and Japan's auto sectors, France's wine industry, the United States' large aircraft industry, and Italy's luxury goods sector all suffer from overcapacity.

The hypocrisy of the US and the EU is exposed by their selective application of standards. While condemning China for alleged impropriety, they themselves engage in a global subsidy race to bolster their own EV industries. The US' Inflation Reduction Act of 2022, for example, provides about $369 billion in tax breaks and subsidies for the clean energy industry, with subsidies for EVs expected to reach $14 billion by 2031.

Such glaring double standard not only undermines the credibility of their claims but also exposes the disingenuous nature of their rhetoric. By weaponizing trade probes on the pretext of promoting fair play in order to stifle competition, they violate the principles of free and open markets they purportedly champion.

The actions of the US and the EU also contradict their professed commitment to environmental stewardship and climate action. By erecting barriers against high-quality, cost-effective Chinese-made EVs, they are undermining their own leadership in the global fight against climate change. This is a disservice to the global community and a betrayal of their responsibility to combat climate change.

Behind the US' claim of promoting fair competition and safeguarding national security is a hidden agenda driven by fear and protectionism. The US and the EU are grappling with the disruptive forces unleashed by China's industrial transformation and the emergence of new economic powerhouses. Faced with the prospect of losing their privileged positions in the global economic order, they are resorting to desperate measures to maintain their stranglehold on key industries. The investigations into China's EV sector are but a symptom of this broader malaise — a last-ditch effort to maintain their economic dominance.

For the Joe Biden administration, launching a trade investigation against China is also influenced by electoral considerations, particularly in a US presidential election year. Accused of being "soft on China", the administration believes the investigation against Chinese-made EVs will project to the American public that the president has taken a very tough stance against China, which in turn will help him to win crucial swing states such as Michigan — the center of the US' auto industry.

The resilience and ingenuity of China's EV industry cannot be underestimated. Despite facing relentless scrutiny and unfair competition, Chinese companies have continued to innovate and excel on the global stage. Their commitment to quality, efficiency and sustainability has earned them accolades from consumers worldwide. And their proactive engagement with emerging markets and commitment to global cooperation bode well for the future of the EV industry.

In these times of degradation of international trade norms, it is imperative that the Chinese government and EV manufacturers shoulder the responsibilities of a major power. They should uphold the principles of fairness, openness and win-win cooperation to propel global economic and trade cooperation and foster global economic recovery.

To begin with, China should use multilateral trade arbitration mechanisms to safeguard the legitimate rights and interests of its enterprises and help reform the international trade governance system centered on the World Trade Organization, so as to adapt to the economic and trade activities of the green era. Thanks to the current inability to litigate subsidies under the WTO's Agreement on Subsidies and Countervailing Measures — because it became ineffective in 2001 — subsidies for environmentally-friendly products today lack institutional safeguards.

Also, China needs to more actively engage with countries and regions, including in fields such as low-carbon technology and green transformation cooperation to create a favorable external environment for the promotion of new energy products. And Chinese car companies should take measures to strengthen cooperation with their US and EU counterparts in areas such as research and development in high-tech, restructuring of global industry chains, and brand joint ventures. By leveraging their respective strengths, they can jointly expand the global EV market, using market forces to overcome political barriers erected by certain countries.

The author is director of the Center for US-China Relations at Tsinghua University. The views don't necessarily reflect those of China Daily.

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