China rejects EU request for voluntary curbs on hybrid car exports as trade talks begin in Beijing: What it means

China has rejected the EU’s request for voluntary curbs on hybrid car exports, adding a fresh hurdle to trade talks in Beijing, Financial Times reported. Brussels is considering import caps or tariff-rate quotas as Chinese carmakers expand their share of Europe’s auto market.

China has rejected a request from the European Union for voluntary curbs on hybrid car exports to the bloc, adding a new flashpoint to trade talks between Brussels and Beijing as the two sides seek to avoid a wider trade conflict, the Financial Times reported on Wednesday, citing two diplomats briefed on the discussions.

Earlier, the European Commission had asked China to voluntarily limit shipments of China-made hybrid vehicles to Europe, according to the report.

The development comes as EU Trade Commissioner Maroš Šefčovič travels to Beijing for two days of talks with Chinese Commerce Minister Wang Wentao.

The negotiations aim to address the EU's widening trade deficit with China, with Chinese exports of relatively low-cost electric and hybrid vehicles emerging as a key issue.

Why are hybrids becoming EU-China trade flashpoint?

The EU has been increasingly concerned about the rapid growth of Chinese vehicle sales in the European market.

Chinese carmakers captured a record share of nearly 12% of Europe's new-car market in August and accounted for roughly one in three plug-in hybrid sales in the region, Bloomberg reported.

Therefore, the surge has put hybrid vehicles alongside electric cars at the centre of the EU's concerns over China's growing automotive exports.

The European Commission is now considering safeguard measures that could restrict imports following a surge in Chinese-made hybrids entering the European market.

One option under consideration is a tariff-rate quota, under which imports would be allowed up to a specified volume, while vehicles brought in above that threshold could face additional tariffs, Bloomberg reported.

The proposed restrictions would be time-limited, said the Bloomberg report.

Why did EU seek voluntary export curbs?

The EU's initial approach was to seek a negotiated solution rather than immediately impose new trade restrictions.

The European Commission had sought China's agreement to voluntarily limit hybrid exports to Europe.

The Financial Times on 17 September 17 reported that Beijing could face higher tariffs if it did not agree to such restrictions.

The commission hopes to get Beijing to accept a unilateral EU mechanism to cap hybrid imports, rather than having China voluntarily restrict exports, according to FT.

What happens next?

The issue is expected to feature prominently in the latest round of EU-China trade talks in Beijing, which are starting on Thursday.

Šefčovič and his team are scheduled to hold two days of negotiations with Chinese officials, with discussions aimed at reducing the trade imbalance without triggering a broader confrontation, according to The Guardian.

The outcome could influence whether the European Commission proceeds with its proposed safeguard measures.

The commission is also reportedly viewing hybrids as a potential test case. If the measures are effective, similar tools could potentially be considered for other sectors where the EU sees significant trade imbalances, according to Bloomberg.

For the EU, the continued growth in Chinese vehicle exports is adding pressure to address concerns over an uneven trading relationship.

China has a large trade surplus with Europe, and the hybrid-car dispute could therefore risk becoming part of a broader trade dispute.

About the Author

Bhanu Pratap is a journalist who reports and writes on foreign affairs, India’s foreign policy, geopolitics and strategic affairs. He closely follows diplomatic developments in New Delhi and has a keen interest in defence and national security.<br> <br> Bhanu also focuses on in-depth, interview-based reports and regularly speaking with experts and policymakers to bring perspectives and context to major developments around the world.<br> <br> He is also interested in stories with strong humanitarian angles.<br><br> One such report examined the cases of Indian nationals who were allegedly recruited and forced into Russia’s war against Ukraine. While reporting the story, Bhanu spoke to the families of those affected and documented their experiences. The report was later taken into account by the United Nations in its findings on human rights violations linked to the war in Ukraine.<br> <br> For Bhanu, the zeal to produce meaningful and impactful journalism remains at the heart of his work.<br> <br>He has previously worked with Firstpost, NDTV, Newslaundry and Republic.<br><br> Bhanu studied at the Delhi School of Journalism, University of Delhi. He initially chose science with plans to pursue engineering, influenced by conventional expectations, but fate had other plans and eventually led him to journalism.<br><br> Beyond the newsroom, Bhanu enjoys exploring culture and history and often spends his days off on heritage walks. He is also passionate about travelling, biking and listening to folk music.<br> <br>For tips, reviews and suggestions, you can reach him at bhanu.pratap@htdigital.in.

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