September 14, 2023 - 4:30pm
This week Ursula von der Leyen announced that the European Commission, of which she is President, would be launching an anti-subsidies probe into the market for Chinese electric vehicles (EVs). This announcement comes off the back of data showing that Chinese EVs are starting to dominate the European market, with reports as early as last autumn showing that these cars were outcompeting domestically produced equivalents.
Von der Leyen said that the probe would investigate whether these EV companies were benefiting from state subsidies and, if they were, that the Commission would consider imposing tariffs on them.
China has responded very negatively, with one widely-read opinion piece in the state-affiliated Global Times accusing the EU of “biased protectionism” and claiming that the Chinese EV industry is no longer subsidised. Another piece in the Chinese outlet said that “Europe is afraid […] of competition from China, so they want to seek trade protectionism as a protective umbrella.”
In fact, Europe’s move toward protectionism should not come as a surprise to close observers of recent developments. When the Nord Stream pipeline was bombed last year it was immediately clear that the continent would no longer be able to compete with countries that still had access to cheap energy.
Unless the EU figured out a new source of cheap energy or found a way to get cheap Russian gas back online, the only logical move that the continent could make would be protectionist. This logic will eventually also hit Britain, which has the same energy troubles as broader Europe.
Since the pipeline was bombed, European industry has already started to feel the pinch. Recent data shows that energy-intensive German industrial output has fallen nearly 20% since the start of the war — a larger drop than was seen during the 2020 lockdowns.
When recession eventually comes to Europe, these declines will be further exacerbated. Every metric shows that manufacturing in Europe and Britain is already in a recession, even as the rest of the economy manages to keep its head just above water.
What does this desperate retreat into protectionism mean? Certainly, the EU should be able to keep foreign products out of the bloc if it imposes sufficient tariffs. But this will raise prices and lead to a further decline in living standards.
Tariffs will not make European products any cheaper on foreign markets, however. What will likely happen is that, shorn of external competition and labouring under high energy costs, European industry will become increasingly uncompetitive in much the same way as British industry did in the 1970s.
Meanwhile, Chinese products will gain increasing global market share. Volkswagens and Audis will disappear from streets everywhere from Riyadh to Jakarta, replaced by Chinese brands like Geely and Dongfeng. We are already seeing the process happen in Russia, where these shifts are being rapidly sped up by the sanctions, themselves a sort of geopolitically motivated protectionism.
Our leaders’ poor management of the new multipolar world will have real, awful effects that could end up impoverishing us. The West seems to think that the old rules still hold, and that it can prevent its own decline by simply asserting itself more loudly and more aggressively. But all this does is blind it to emerging realities, preventing rational planning and management, and burning through its remaining diplomatic capital at a scary rate.
Europe and Britain will be the first to feel the pain but, as with the cycle of economic destruction unleashed by the Smoot-Hawley tariffs in the early-1930s, America too will eventually be in line for some serious blowback.
Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics
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SubscribeRead an interesting article about the vast array of complex carbon reduction regulations that are coming to New York. The volume and complexity of the regulations is mind boggling.
Here’s what really caught my eye; “Urban Green Council estimates that if all buildings meet their 2030 carbon caps, the annual retrofit market will grow to about $3 billion, with up to 126,000 “green” jobs created by 2030.”
I guess we know where the green jobs are coming from – an army of regulators and contractors who bring zero added value to the economy, who exist only to facilitate the introduction of a vast array of govt mandates.
https://www.city-journal.org/article/gothams-airheaded-carbon-law
Subsidies are a lousy way to run the economy, other than possibly a handful of exceptions. The role of govt should be building the infrastructure that facilitates trade and commerce – roads, rail, ports, energy etc. The EU and most of the west have neglected all these. If you have some of the highest energy prices in the world, manufacturing will simply move elsewhere.
Time to stop importing foreign gas and oil then, given that we’re sat on more than enough for our own needs. We could even export some to our European ‘friends’ if they stop the b*****s crossing the Channel.
I have full confidence that Ursla von der Crazy will beat the Chinese, you go girl
Maybe if the European car companies could make better and more affordable electric cars, the competition from China would not be such a problem.
Europe’s fascination ( enthrallment ) with electrification is a case study in mob psychology. Damn the facts, we must all drive electric vehicles to save the planet. It is a moral imperative. Or, so say the elites.
Sadly, this bizarre take on “climate reality” is infecting American elites. Joe Biden, the hapless sod pretending to be our President, is proposing to convert the entire U.S. heavy trucking fleet to electric only by 2030. The impact of this change would be the equivalent of the crash of the U.S. stock market in 1929, and the climate facts don’t even begin to justify such a radical move.
But, no matter. This is no longer about science and healthy economies for the average person. It is a social mental disorder among the well-heeled. And, it is reckless.
“Alice laughed. ‘There’s no use trying,’ she said. ‘One can’t believe impossible things.’
‘I daresay you haven’t had much practice,’ said the Queen. ‘When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”
― Lewis Carroll, “Alice in Wonderland”
The UK’s energy troubles could be fixed with a few nodding donkeys in the Trough of Bowland, Weald Valley and parts of Wessex.
In the 1990’s onwards the UK and EU promoted diesel as it was lower CO2 than petrol, even though they knew full well about the particulate and NOx issues. As the diesel cars, including later Euro 4/5 cars are demonised by governments now for causing breathing/lung issues and death, then those earlier cars especially must have killed quite a few people. So the responsibility for that is on those governments that promoted them via tax advantages knowing the increased pollution they created in order to reduce CO2, which isn’t a pollutant.
Fast forward to a few years ago and VW Group was caught cheating diesel emission testing. This is what caused the rush to electric cars. The irony being that the Germans aren’t very good at it and the Chinese are. Maybe Europe should leave technology to the Chinese.
How Adolf would have loved that caption photograph!
Net Zero, the gift that keeps on giving… not.
Another pro China nonsense from usual source.
For a start gas prices were going up well before Russian invasion of Ukraine.
Because of green idioces.
Who is going to invest in fossil fuels exploration and technology if his business will be less popular that H**er?
So it was the West own goal.
Author ignorance of car market is another problem.
People do not buy Audi or Mercedes cars because there are no cheaper alternatives.
No different from why people live in Chelsea and not in Peckham.
The idea that Chinese electric cars can somehow dominate developed world is nonsense.
Where is the grid infrastructure to support it?
Decision by the West to stop development of ICE cars is another own goal.