EU subsidy probe a betrayal of commitment

By launching an anti-subsidy investigation into Chinese-made electric vehicles (EVs) in the name of mitigating the risks highly subsidized EVs pose to European automakers, the European Commission has not only deviated from global trade norms but also betrayed the European Union's solemn pledge to promote free and fair trade. China does not want another tariff war but is not afraid to take on the EU if the latter launches one.

China's anti-subsidy and anti-dumping investigations on EU dairy products, pork, brandy, and other agricultural products were initiated in response to applications from domestic industries, rather than as retaliatory trade measures against the EU. However, these measures can help the EU and its member states deeply realize the essence of the complementary and mutually beneficial nature of China-EU economic and trade relations.

The EU's anti-subsidy investigation, launched in October 2023, without receiving any complaints from EU automakers or EU member state governments, violates Article 11 of the World Trade Organization's Agreement on Subsidies and Countervailing Measures. But instead of stopping the investigation, the EU released the draft of its final decision on Aug 20, 2024, further breaching global economic and trade rules and practices.

China has always abided by international norms while the EU has been trampling on international trade rules and practices that have developed in the more than seven decades since the end of World War II. Incidentally, these rules and practices were established by European and American leaders.

For years, the EU has been slowly but surely resorting to protectionism, earning the nickname "Fortress Europe". Its economic policy is marked by increasing regulations which hinder innovation, which has led to its declining economic vitality and global influence.

This is not to deny European countries' significant contributions to trade liberalization and the multilateral trading system. Europe's contribution to global trade can be gauged from the fact that all the directors-general of the General Agreement on Tariffs and Trade (the precursor to the WTO) were Europeans — Eric Wyndham-White, Olivier Long, Arthur Dunkel and Peter Sutherland. Also, three of the seven directors-general of the WTO were Europeans: Peter Sutherland, Renato Ruggiero and Pascal Lamy.

Notably, the EU's predecessor, the European Community, was founded with the explicit aim of fostering economic growth by eliminating trade barriers on the continent. This spirit of cooperation and openness led to significant tariff reductions and facilitated trade, which in turn fueled Europe's economic growth.

Evidently, the EU's stance toward China, characterized by protectionism and restrictive measures, represents a significant deviation from its original commitment to free and fair trade, and this could lead to painful consequences. Europe's share of the global economy has been shrinking over the years. In 1990, the 12-member European Community accounted for 29.6 percent of global GDP and 31.2 percent of global exports. But in 2023, the 20-member eurozone accounted for only 14.7 percent of global GDP and 24.7 percent of global exports. Even if the United Kingdom were added to the EU, the figures would increase to just 17.9 percent and 26.9 percent.

Hence, the EU cannot afford to let economic globalization perish. Since the "Age of Discovery", Europe's rise has been driven by free and fair trade. The two world wars, which ultimately undermined Europe, were triggered, either directly or indirectly, by anti-globalization moves.

The EU should realize that its decline as a promoter of free trade and open economy will greatly undermine its global status.

Therefore, it is imperative that EU policymakers rethink their approach to global trade. Implementing protectionist measures under the guise of "decoupling" and "de-risking" from the Chinese economy will be detrimental to the economic prospects of not only China but also the EU. In a world interconnected by trade and investment, unilateral restrictions would only serve to isolate economies and stifle growth.

China, as a responsible member of the global trading community, has consistently adhered to WTO rules and promoted open and inclusive trade policies. So it is time the EU reconsidered its trade policy and fulfilled its original pledge to promote global development through free and fair trade.

The author is a researcher at the Chinese Academy of International Trade and Economic Cooperation. The views don't necessarily reflect those of China Daily.

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