The article highlights escalating trade tensions between the EU and China, primarily centered on tariffs impacting Chinese e-cars. It underscores concerns from European industries, particularly robotics, regarding China’s rapidly advancing competition. Alexander Brown from Merics advocates for EU government support to bolster domestic firms against cheap imports. With China’s prowess in robotics and various sectors threatening European markets, the need for fairer trade relations and potential countervailing duties is emphasized to ensure a balanced economic landscape.
Current trade disputes between the European Union and China predominantly center on tariffs related to electric vehicles from China. However, various European industries are feeling the pressure from the rapid rise of Chinese competitiveness. Recently, the robotics industry association highlighted the increasing quality of competition from China, with Alexander Brown from the Berlin think tank Merics advocating for European governments to take proactive measures to support domestic businesses. He argues that countervailing duties are essential for safeguarding the national economy and do not equate to protectionism. While he sees merit in inexpensive Chinese imports, he emphasizes the need for a ‘new business foundation’ in EU-China relations to ensure a prosperous future.
ntv.de: The global robotics association IFR is warning about a surge of Chinese manufacturers entering the European market. Is this a cause for alarm?
The apprehensions are valid. China’s capabilities in robot manufacturing have seen significant improvement in recent years. By 2022, the IFR noted that China would account for more than half of all industrial robots globally. Major foreign robot producers, including ABB, are establishing cutting-edge production facilities in China, resulting in a substantial knowledge transfer to local manufacturers. While foreign companies, particularly Japanese, have long dominated the robot and key robotics component market, an increasing number of Chinese firms are emerging with competitively priced products that maintain acceptable quality levels. Their strategy aims to reach 80% of the quality standards set by foreign competitors while pricing their goods at just 20% of those costs. This tactic could prove effective, heightening tensions between the EU and China.
Which industries face potential overtaking by Chinese competitors?
In addition to the heightened scrutiny on electric car subsidies, the EU Commission is currently investigating several Chinese firms venturing into European markets. These investigations cover Chinese suppliers across industries such as rail transport, solar technology, wind energy, and safety equipment for airports and ports. Chinese industrial firms are swiftly advancing in critical sectors within Europe, particularly in Germany. In the field of chemicals, China is now on par with Germany in global exports, having surpassed Germany in specialty machinery and electrical equipment manufacturing.
The challenge of catching up is not new, yet the European economy seems unable to effectively compete with China. Why is this?
China benefits from its state-controlled economy and expansive market, with the government heavily investing in local industries. The construction, cement, steel, and railway sectors are dominated by state-owned entities that prioritize growth over profitability, supported by protected markets and low-interest loans from state banks. This has resulted in significant production capacity, regardless of profit margins. Additionally, China’s rapid economic growth, its skilled yet affordable labor force, and state-of-the-art infrastructure have all contributed to its competitive advantage. Even with less government protection, global industry dynamics would have shifted toward China.
Do European robot manufacturers need to adopt cheaper production methods to withstand Chinese competition?
Creating high-quality products at competitive prices remains a successful approach. European firms are renowned for their quality; the challenge lies in cost efficiency.
What strategies could enhance cost efficiency?
To remain competitive, European businesses must receive support for investing in advanced manufacturing techniques that can lower labor costs. They also need access to affordable energy and assistance in navigating regulatory challenges. Furthermore, governments can stimulate demand in robust sectors, enabling businesses to grow and enjoy economies of scale.
What are your thoughts on implementing protective measures against Chinese market entries?
It is crucial for European governments to assist their local enterprises in competing successfully. In sectors where Chinese subsidies seem unfair, the EU can introduce countervailing duties. Such actions defend European companies from unfair competition and act as a corrective measure against external market distortions rather than fostering local monopolies.
Is it feasible to enforce punitive tariffs in all sectors impacted by Chinese competition?
This is not practicable. The EU Commission must investigate individual cases before imposing tariffs, and the response should be selective, focusing on the sectors most at risk from unfair Chinese competition. Not all sectors will warrant tariffs; for example, the European solar industry is relatively small, and propping it up might not justify the associated costs. Chinese solar modules, while inexpensive, present minimal risk to job security in Europe and aid in achieving climate objectives.
If numerous sectors were subjected to tariffs, would that influence China’s industrial policy?
China’s approach to industrial policy will likely remain unchanged. The Chinese government will continue to bolster domestic companies, market share growth, and promote exports. Despite potential tension in economic relations with industrialized countries, including those in Europe, there is no indication that Beijing will alter its policy direction