Editor's words
Despite the signing of contracts between Chinese and foreign car companies, the participants all talked happily, but during the negotiations, the struggle for interests did not have too much warmth. "Devil" is hidden in "details."
After China joined the WTO, the negotiating officials finally won a “protection period†for the Chinese auto industry for three years. In 2006, it was the year that the Chinese auto industry fully fulfilled its WTO commitments. Although the fragile Chinese auto industry has not completely retreated as pessimists thought, it is a big step forward that must be both cautious and unrelenting.
Sino-European automobile trade friction behind the scenes
Our reporter Ning Ping Guangzhou reported that when South Korean farmers gathered in Hong Kong for a demonstration, the EU warned that China should further open up the auto market.
On December 12th, the European Union’s vice chairman of business and industry, Günter Verhoegen, announced at the European Union headquarters a final report titled “The 21st Century European Automotive Industry Competitiveness Improvement Program†(Cars21 for short), demanding that China To further open up the market to European automakers, otherwise it will face the EU's legal complaint in the World Trade Organization (WTO).
Ironically, the day before, EU Trade Representative Mandelson had already set a tone for the 6th ministerial meeting of the World Trade Organization in Hong Kong, and the EU is not prepared to make new concessions on agricultural trade barriers.
Question upgrade
The delegation of the European Commission to China provided the reporter with an English electronic text called the final report of Cars21. In this 72-page report, China’s “lucky fortune†was focused on “taking careâ€: not only is it the only international market that has been named, but it also provides a separate section on the Chinese market.
The report cited the "seven sins" of the Chinese market: favoring domestic manufacturers, restricting the proportion of investment, discriminating against the import of whole vehicles (domesticized requirements and import restrictions of key components), and seldom consulting European automotive companies investing in China in the field of industrial legislation; Cooperation with the United Nations Economic Commission for Europe, weak protection of intellectual property rights, delays in legislation, and potential problems with sales channels and other business arrangements. The report suggested that the European Commission “continue to closely monitor China’s business and regulatory developments, and consider that if the current situation does not improve, it will assess whether the eventual recourse to the WTO Dispute Settlement Committee is likely to succeedâ€.
As early as November 7, Mandelson’s spokesperson, Stephen Adams, publicly declared that the EU may complain to the WTO about China’s auto import mechanism on the grounds that “China’s auto parts import mechanism†violates WTO rules. Adams said that if the EU and China cannot resolve these issues through bilateral negotiations, the European Commission will decide whether to submit this issue to the WTO after December 12. The basis for the decision is the Cars21 report.
The matter was initiated by the “Administrative Measures for the Import of Auto Parts that Constitute the Characteristics of the Vehiclesâ€. In this approach that was implemented from April 1, 2005, it is stipulated that imported auto parts with the characteristics of the entire vehicle will be regarded as vehicles. In taxation, there is a tax rate difference of up to 15%.
For European automotive companies that have long relied on imported key components in China and have a low proportion of localization, this means a substantial increase in costs. European luxury car manufacturers such as Mercedes, BMW and Volvo have taken the lead. The production volume of luxury cars is small, and only by adopting centralized purchasing methods at the headquarters can they have scale advantages, so they are not willing to establish supporting systems locally.
Not only luxury cars, although the European automobile companies represented by the public have invested in China for many years, but in terms of localization, the overall level of European automobile companies is still lower than that of Japanese and Korean companies. A notable example is that the Peugeot-Citroen Group’s joint venture in China, Shenlong, suffered huge losses last year, a large part of which came from exchange rate risks caused by imports of key components. Dai Lin, chief representative of the European Automobile Industry Association’s representative office in Beijing, also stated that the European automakers investing in China have difficulties in achieving the localization rate of parts and components required by the Chinese government. They hope to have a two to three-year transition period.
Take offense
The question of import tariffs on spare parts has been extended to 7 issues. Does the EU really want to upgrade this matter? “Europe’s auto companies have different interests in China. This time throwing 7 issues is the overall appeal of European auto companies in China’s interests. But on the other hand, this has played down the tit for ta The real purpose of its color is likely to be to grow its momentum and force the Chinese government to sit with them at the negotiating table. After all, resorting to the WTO dispute arbitration mechanism is a laborious task for both parties.†China WTO Research Society Related person analysis.
The European Union has put out a tough stance that does not hesitate to fight an auto trade war with China. To a certain extent, it is out of fear of losing the Chinese market. What is more important is that the output value of the EU's exports of auto products to China has dropped significantly, which has exacerbated the EU's trade deficit with China. From January to September of this year, the European Union’s trade deficit with China reached 49.02 billion U.S. dollars (2004 was 37.04 billion U.S. dollars), and it has long served as a vehicle for balancing trade deficits in the EU-China trade relationship. Its role has gradually disappeared.
For European car manufacturers, China is both their immediate concern and their far-sightedness. The near-term concern is that with the increasingly fierce competition in the Chinese auto market, the original advantages of European auto companies have been replaced. Far-sightedness is that European auto companies are afraid that the auto products from China will impact the European market like Japan and South Korea.
“From leather shoes to textiles to automobiles, Europe has a deep fear of price competitiveness for Chinese products.†A European automotive company’s representative in China told reporters: “Japanese cars have taken 15 years to open the European market. It took South Korea 10 years to use cars. They are concerned that Chinese cars will only take about five years.†And George Ma, executive general manager of the European Union Chamber of Commerce in China, also predicted that the time for Chinese-made cars to enter the European market on a large scale is “not earlier than five years. Will not be later than 10 years."
According to the data listed in the Cars21 report, the automotive industry accounts for 3% of the EU's GDP and 7% of the total manufacturing value. The EU’s auto industry directly provides more than 2 million jobs and supports 10 million indirect jobs, which is equivalent to 7% of the total European manufacturing employees.
Just as Mandelson declared before the Hong Kong WTO ministerial meeting that he would not make greater concessions, the EU warned that further opening up the automobile market in China is also a strategy of taking offense. Next, will Mandelson be able to sit back at the negotiating table with the Minister of Commerce of China, Bo Xilai, as he wished? (Reporter Luo Yi also contributed)
China-European Automobile Dispute: We Are Just Empty Propaganda
The quarrel between China and the EU on strict control of imported assembly vehicles in China has continued for more than a year. Although the EU Economic Commission claimed to file a lawsuit at the WTO level, it has never been implemented. After the officials of the National Development and Reform Commission went to talks in Europe this fall, they only said “returning from research and study†and even gave Beijing Mercedes-Benz a one-year tariff concession for imported assembly vehicles. It seems that they have no intention of keeping tough.
The mutual support of interests is the main reason why China and the EU are not willing to tear their skin.
The incident originated from the “Imported Parts and Components Characteristics of Vehicles Management Regulations†formally implemented on April 1, 2005. As a result of this approach, all domestic new cars assembled from all CKD parts must be paid according to the tariffs of the vehicles, and in accordance with customs regulations, this Batch import of large assembly parts must be implemented tax. As a result, it will become uneconomical to put imported vehicles on wheels and sell domestic cars because imported parts only have to pay a 15% tariff, and if they are paid by the whole vehicle, they will reach 30%. The EU immediately shouted "unfair" after learning
Officials from the National Development and Reform Commission said: "From the very beginning, they strongly objected to the EU's view that it was setting a double standard in China, namely exporting loose and importing strict." At the end of September this year, Germany exposed the Jiangling Landwind "crash gate" incident and concluded that it was riding. Similar vehicles "have no life" after a collision. The EU believes that in this situation, China’s policy of supporting exports is a clear double standard and it proposes to submit it for discussion in the WTO. The National Development and Reform Commission’s Industry Department said in its negotiations that “the case is not sufficient to support the facts. The EU should indicate that the specific Chinese government’s actions violate the WTO agreement.â€
In the first three quarters of this year, luxury cars still accounted for the largest proportion of vehicles imported from the European Union, including some of the BMW 5 Series cars assembled in China. Considering that Mercedes-Benz and Volvo brands will be exported to China in 2006, Assembled, the EU can not suppress China too much for the benefit of its own industrial workers.
Under the premise that China is unwilling to make more concessions, the newly-entered luxury brands will be able to enjoy the preferential treatment of imported assembly vehicles to pay part tariffs within a buffer period, and then persuade the EU’s powerful trade unions to China’s Behave at a glance and close your eyes so that you do not lose out. Because if China adds any non-tariff barriers, European cars will be at a disadvantage in competition with Japan and the United States.
In fact, there is no need for China to impose extra punishment on the taxation of luxury brands, because its scale is not high in itself. "It does not matter whether CKD or localization, as long as it is a total tax on imports, we don't care." This attitude of the National Development and Reform Commission makes local governments more comfortable because no matter whether it is Changchun, Shenyang, or Beijing, Chongqing, The luxury brand localization projects such as Audi, BMW, Mercedes-Benz and Volvo have a direct interest in enhancing the image, increasing employment, and guaranteeing fiscal revenue. To this end, Minister of Commerce Bo Xilai and Mayor of Beijing Wang Qishan repeatedly discussed relevant project progress with related ministries and commissions. Wang Qishan even said "Beijing Ben" silently. They do not want the state's policy to scare these wealth gods away.
China and the European Union are vacillating on the issue of automobiles, but there will be no real guns falling because everyone is afraid of hurting themselves.