Clearly, the voting outcome shows that the EU member states are very divided on this question in part because each member state has its own economic structure and therefore its own sense of its economic interests.
Europe is lagging behind, so the solution is not protectionism.
And the solution is in the future orientation of science, technology and cooperation.
In the short term, it could reduce the competition from Chinese EVs and allow the European companies to have a greater market share.
But in the longer term, I think these measures are definitely going to slow innovation and make the European market, especially the European car makers, less dynamic and less competitive, also harming the supply chain.
The chat lounge unpacks views and opinions on hot issues in a more casual way.
Welcome to the chat lounge, I'm Suya Wen.
Joining me to discuss the China -EU trade dispute over Chinese EV tariffs are Professor Li Luan, assistant professor of economics at Peking University, Hiaoga Zip -LaRouche, founder of the Schiller Institute, a Germany -based think tank and Professor Warwick Powell, senior fellow at Taihe Institute and adjunct
professor at Queensland University of Technology.
Welcome back to the chat.
After a year -long anti -subsidy investigation of China -made EVs, the European Commission voted to impose tariffs on imports of these vehicles.
China's Commerce Ministry has criticized the move, noting that industry did not request the anti -subsidy probe, and some EU countries and automakers also strongly opposed the measures.
So Hiaoga, why is the European Commission pursuing these tariffs now?
Well, I think as all of the auto producers in Germany and many other associations from industry have made very clear, it is very counterproductive for both sides, and it speaks totally against the principles of the free market.
So economically, it does not make sense, but I think I would attribute it more to the political climate, because in the recent months, the United States has been demanding decoupling of the economies, which the EU Commission more softly called de -risking, but it's basically coming down to the same thing.
So I think, given the fact that the economies of European nations and China are so interwoven, these tariffs can only hurt both, and naturally, China has become, in so many respects, the most leading economic superpower, that some industries may feel that they have an advantage from tariffs.
But I think it's still the wrong way, and these differences should rather be taken as an encouragement for European nations to speed up with their science and technological development.
There's no way how you can contain Chinese development by imposing tariffs.
It's just a completely wrong method.
But as I said, I think it's primarily politically motivated, and it has to do with the general calling China, and other nations rivals and competitors, and so forth.
Rather than seeking cooperation, it is geopolitically motivated.
Professor Liduan, what's your take on what Helga has just said?
Do you think is this because of so -called the free market issue, or is this a political -driven move against the Chinese EV makers?
Because as we know, even though the EU said that it wants to protect itself against the potential flood of cheap Chinese EV imports benefiting from state subsidies, but as far as we know, European companies are also benefiting from their own government subsidies, and also Chinese EVs are not cheap in Europe.
What's your take on the issue?
Yeah, I completely agree with Helga that I think this is more of a political issue than economic issue.
And from an economic point of view, I think 90 % of economists in the world are opposed to tariffs, because free markets brings more of a variety of goods.
If you don't like the products that you're importing, you can choose not to buy from the consumer's perspective.
From the supplier's perspective, higher imports bring more competition, and it brings a more healthy industry environment.
So I completely agree.
I think this is more from a political standpoint.
But you also raised an interesting point in terms of there's different pricing of Chinese automobiles in, for example, China and in versus in Europe.
And I think that's completely determined by the local supply and demand.
Instead of we're arbitrarily setting prices differently, because if you set the arbitrarily high price, but you can't sell a single car in Europe, of course they're going to cut their prices.
But one thing that I want to mention about the tariff is that I think the current tariff raises some important concerns about fairness and transparency, especially when it comes to charging different tariffs for different car manufacturers.
As you said, Professor Li, if we look at the new tariffs proposed by the EU, besides the standard 10 % import duty cars, the new tariffs are 7 .8 % for Tesla, 17 % for BYD, nearly 19 % for G -Li and the highest, the 35 .3 % for Sike.
Why does Tesla receive such a low tariff while other Chinese made EV brands, especially Sike, faces the highest tariff?
How did the European Commission come up with this specific figure for each brand?
Officially what they say the European Commission said is that they based these rates on their assessments on each manufacturer's operations, their engagement with the government, how much subsidy they receive, how much production cost they spend, and also their pricing strategy.
But personally, I think this measure, especially setting different tariffs for different companies is a very dangerous precedent to set, because first of all, companies may receive different levels of subsidy at different stage of development.
If they, for example, receive some subsidy in the early stage when they're still growing, it's very different from the point where they are already into mass production.
So if you charge a higher tariff for a company for the amount of subsidy that it has already received and is no longer receiving, I don't think it's a fair practice.
And also I think the reason they set a very low tariff for Tesla is somewhat reflecting the EU's opinion that Tesla is relying less on state aid compared to other brands, for example, like Syk.
But that's only, I think, very arbitrary.
And also I don't think that factor alone explains the vast difference, the five times difference of 7 % tariff for Tesla and 35 % for Syk.
So I'm completely against these differential treatments.
I think it's not fair and not transparent.
Professor Powell, what's your take on the different tariffs set for different brands when it comes to US brands Tesla and when it comes to Chinese made EVs?
Because we know, even though Tesla is a US brand, it has received large amounts of subsidies from Chinese government, especially when it comes to Shanghai, a gigafactory.
It received strong support from the local government and the low interest loans from the Chinese banks.
So what's your take on their double standard practice when it comes to different brands?
Well, clearly, it's a double standard and it's clearly arbitrary.
The foundations upon which these decisions have been made are opaque.
The methodologies have not been made available for researchers and independent analysts to scrutinize.
And ultimately, I think it points to, if not necessarily demonstrates, the fact that the move towards imposing tariffs is driven by, I guess, what, as the other guests have described, political considerations.
The fact of the matter is, is that the EU, particularly under the present leadership of the European Commission is in desperate states economically.
The Eurozone economy is broadly in a funk and the industrialization is a reality that has largely been the result of energy shocks, which have been a consequence of policy decisions made by the European Commission that has undermined the ability for Eurozone economies to access low cost reliable supplies
of energy. So you put all of that together.
You've got a situation in which desperate people begin to do desperate things.
And the desperate things that they're doing is reaching into the old kit bag of defensive policy measures that ultimately are likely to cause more self -harm than improve the situation.
This is chat lounge.
Next, we will delve into whether the EU's anti -subsidy investigation of Chinese EVs was fair and transparent, and how the tariffs could hurt the EU's auto market.
Welcome back. We continue discussing the EU's tariffs on China's EVs and how they could hurt the EU market.
Professor Powell, we have also noticed that this investigation, the anti -subsidy investigation launched by EU on Chinese EV was not initiated by complaints from the local auto industry in European countries, but rather by pressure from some governments, such as France and a few other members who voted
yes to increase the tariffs, which is different from the Euro practice.
So what's your take on the procedure that EU Commission taken in this case?
It's a political process.
Again, the facts of the matter, which of course haven't played a particularly large part in these deliberations, is that Chinese manufactured EVs comprise a relatively small market share in the European economic situation and in the market, and even assuming substantial market share growth over the near
term. Chinese manufacturers are not expected to suddenly swamp the market, which I think is some of the rhetoric that was used at the time as the issues were prosecuted so as to lay the political groundwork for this particular inquiry and then the subsequent imposition of tariffs.
Much of this is hysterical.
It is driven by a defensive attitude that really emerges against the backdrop of failed economic policies on behalf of the European Commission leadership.
This is an attempt to gloss over those failures and a concrete demonstration of a refusal of the European Commission leadership to look themselves squarely in the eyes, to take a good look in the mirror and understand what it is about the policies that they've adopted in the recent past that has led
to this situation. They commissioned a report by the former Italian Prime Minister, Mario Draghi, on the question of European competitiveness and frankly at the heart of the report was high energy costs.
I mean the report devoted no more than a few paragraphs to the issue of high energy costs but high energy cost is at the root of Europe's declining competitiveness and until and unless they tackle this issue of energy costs, the rest of it is about pointing blame at other people when in fact the blame
should be pointed fairly and squarely Helga, what's your take on Professor Powell's opinion?
How might these tariffs affect competition in the European EV market?
While they ultimately benefit or harm the European consumers and this EV industries?
Well, I think Mr. Powell is completely right concerning the low, the high energy prices being the real major problem here.
I mean, if these tariffs are imposed, the consumers will pay a higher price so they suffer.
But also all the German car makers, all of them VW, BMW, Mercedes, they all are absolutely against these tariffs because the German economy is very largely dependent on the auto market.
I think every sixth job is in the auto industry either directly or retail suppliers.
So it's a huge blow to the German economy and therefore I think it's completely, Chancellor Scholz had made an effort to oppose it but he was overruled by, I think, 12 other members in the EU.
But I think, I agree with Mr.
Powell that the energy price question is what one should focus on because the downfall of the German economy, for example, really started when the sanctions against Russian cheap energy was imposed.
And then actually when the North Stream pipelines were sabotaged, that really dealt a lethal blow.
And as you look at the recent investigations, everything really points to the fact, the question is, who sabotaged the North Stream pipeline and for what reasons?
Seymour Hersh had famously put out a thesis that everything pointed to the United States and possibly the British, Norwegian cooperation and now more recently there is a harbor master in Denmark who basically observed American ships some days before the sabotage occurred and he thought they had turned
off their transponder and when he thought they were in trouble, he sent a rescue mission, his people were sent back rudely.
But on the other side, President Putin has offered to reopen the pipeline because one is not completely destroyed and the other one could be repaired.
So I think there you see again and again that it's in the political realm where these decisions are made and it doesn't make economic sense at all.
I think we are heading towards a huge crisis because the German economy right now is in a free fall, it's a complete de -industrialization which will have enormous social consequences because the entire social state in Germany, relative high quality of it, was dependent on a strong economy and when that is taken
apart, the whole country is in trouble.
So I think this is not just a tariff issue but it's a huge issue.
Professor Li, the same question to you, you know competition plays an important role when countries trying to boost this innovation and competitiveness.
For example, Tesla and European manufacturers have been the largest driver of ongoing innovation among Chinese EV companies.
So now with EU trying to impose the tariffs on Chinese EV makers, I mean how well that ultimately benefits or harm its own EV industries?
Yeah, so I think one of the largest criticisms of EU to, for example, Chinese EV makers is that they receive a lot of subsidy from the government.
It almost sounds like subsidy is a bad thing to begin with but subsidy or tariffs in principle they are neither good or bad as long as it promotes competition.
It's good as long as it deters competition.
I think it's less desirable.
So in terms of China's case, if you study what Chinese government has been doing in terms of subsidizing the local manufacturer, it has, for example, gives the consumers a lot of subsidy in buying these vehicles and also giving the suppliers, the car manufacturers, a lot of subsidy in their early stages
to help them build.
So I think in terms of the tariffs, what people are really not understanding is that it's not a effective way to address this competition from China because in the short term, it could reduce the competition from Chinese EVs and allow the European companies to have a greater market share.
But in the longer term, I think these measures are definitely going to slow innovation and make the European market, especially the European car makers, less dynamic and less competitive, also harming the supply chain in general.
So I think this is a very myopic and as Professor Powell said, hysterical measure.
And in terms of for consumers, higher EV prices from the tariff is definitely going to harm consumers, both limiting them for their affordable options for EVs and also potentially affecting the goal of European Union becoming carbon neutral by 2050.
So I think overall, these tariffs are definitely going to bring very detrimental effect to European consumers and industries.
We've been discussing the damages and negative influence that these tariffs will have on European markets and its automakers.
How about China? Because we know the European market accounts for about one third of China's EV exports and also these vehicles are typically so that higher prices abroad.
So what does the introduction of the as high as 45 percent of tariff on Chinese EVs main for Chinese EV makers, Professor Powell?
Tariffs, of course, are imposed on vehicles manufactured outside of the Eurozone and therefore added to the cost of the landed product.
Now, as you add a tariff to the product, it will, of course, shift a product's price competitiveness on a like for like basis.
So that's the first thing to remember is that we're talking about the relative change in the competitiveness of like for like products.
The impact of that is likely to be quite diverse.
For instance, there will be market segments that will absorb those price increases for the like for like product because the product quality of the vehicles produced in China will be sufficient to enable those buyers to justify the additional cost anyway, because on a like for like basis, they're still
very, very good value motor vehicles.
The point to remember on that score is that the average cost or the average price of a European manufactured EV is twice the average price of a Chinese manufactured EV.
So even an average application of a tariff of 45 percent is unlikely to fundamentally transform the cost competitiveness situation.
The second response, of course, is that some buyers will find that additional cost in post a difficult pill to swallow and will adjust their buying decisions either by not buying a motor vehicle when they were intending to, which of course then affects market share, or more likely than not shifting
their buying to a lower price product.
So they will continue to buy a product.
They will just buy a lower price product and change their preferences accordingly.
They're the kinds of distributional impacts that I think are likely to happen.
I would also say this is probably a last observation in response to your question.
And that is that the market for Chinese made EVs is not restricted to the European Union.
Other parts of the world are growing rapidly.
And in the event that there is a significant impact on volume as a result of these tariffs, it would not surprise me if Chinese manufacturers and effectively and rapidly shifted their focus to other growing markets to deliver products that price people in rather than price people out through artificial
pricing and confected scarcity.
So I think the impact will be on consumers.
They will either be paying more than they would otherwise be paying, or they will shift down the price curve to what is in effect a lower graded level product for the price they were willing to pay in the first place.
Professor Li, I want to come to you on this question as well.
We know the investigation has been going on for the past year, and we have seen a number of exports from China to European countries are actually dropping compared to the past few years.
Industry insiders were saying that maybe it will have an impact on China's new energy vehicles exports to Europe in the short term.
But in the long term, they will, for example, optimizing the structure of export models and localization is another way to respond to tariffs.
Maybe we will see more and more Chinese brands accelerate their localization plans in Europe.
So what challenges and opportunities might this present for Chinese EV makers global strategies?
Yeah, definitely. I think so.
First of all, let's understand how much how many vehicles are we talking about because you said the total number of EV exported to you is a third of the number.
So China is not exporting a whole lot of EVs at this stage.
So it's exporting around 1 .5 million cars to the entire world outside of China.
So to the EU, it's around a third of that, which is 0 .5 million or 500 ,000.
And it's very interesting that a lot of the countries, for example, friends that is strongly opposing to the to the or strongly supporting the tariff against China, Chinese EV makers are not the largest importers of Chinese EV makers.
And who are the largest importers?
Belgium and UK. For example, Belgium imported more than 150 ,000 cars in the first largest importers.
Germany imported less than 50 ,000 units.
So in terms of total units of cars, I think, compared to the amount of EV vehicles supplied with Chinese market, these exports are not very much to the Chinese manufacturers.
So that's the thing I want to convey to the listeners that first, of course, it's going to be to give a headache to the Chinese manufacturers, but it's not that large in the current stage.
And you also mentioned opportunities and challenges.
Of course, I think this opens up new rounds of negotiations and even, for example, joint ventures with European partners, because right now, you know, Tesla opens a factory in China.
Why can't, for example, one of the Chinese manufacturers like BYD open a plant in one of the European countries to avoid tariffs?
I mean, that could potentially open the European market and help the Chinese manufacturers adjust their marketing and global strategies.
I think definitely there's going to be ways for them to do that.
But overall, I just don't think it's going to be such a pressing issue on their financial statements at this current stage.
This is chat lunch.
When we return, we will discuss the challenges and opportunities presented by EU tariffs on Chinese automakers and how the tariffs could possibly reshape Chinese EV makers global strategy.
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Welcome back. We continue our discussion on EU tariffs on Chinese EV makers.
Hiaoga, Professor Li mentioned that France plays a strong role in supporting the European Commission in imposing tariffs on Chinese EVs.
Why did France vote in favor of this proposal?
How do you assess its role in pushing the EU against the Chinese EVs despite knowing the potential harm to their own EV industries and consumers?
Well, I would think that that's probably due to the incredibly instable situation in France.
If you look at the recent election, Macron got a smashing defeat and the new government is the right wing government, but they will be forced to cut back on the budget.
This is also demanded by the EU.
This obviously is causing tremendous opposition from the left majority, which in terms of numbers did win the election.
That makes altogether a very instable political situation.
I think it's also scapegoating, which plays a role here.
I would think that it's primarily politically domestic reasons why France is doing it, because the French economy is in almost as bad a condition as the German one.
It's the question which one is doing worse at this point.
This is all due to the fact that rather than correcting policies, in a certain sense, you can say that the entire EU Commission policy in the last period was detrimental to real scientific and technological innovation.
That is why Europe, in general, is legging behind China.
So then if you have these additional political problems where the population does not agree with the policies of the government, the government tends to look for scapegoats.
So I think in the case of France, I would attribute it to that factor for sure.
Professor Powell, what's your take on Helga's take?
What does France aim to achieve from pushing these tariffs against the Chinese EVs?
I think French politics explains a lot of this, and we are seeing increasingly a politics dominated by gestures, as opposed to politics dominated by well thought through policies.
The problems of industrial hollowing out that have become apparent in Europe in recent years, of course, has been bubbling away for quite some time and deflecting responsibility and identifying scapegoats plays very, very well to a domestic audience that is suffering from the post pandemic problems
of economic recovery, the structural issues of industrial hollowing out, the terrible impacts on cost of living as a result of the energy shocks and the seller inflation that's been passed through to ordinary households.
It is very, very much a politically inspired reaction.
I think that that's been a dominant theme for the discussion today.
The other thing that I think I might just mention, and Professor Lee touched on this earlier, and it's an important point.
Some Chinese firms have already established facilities in the Eurozone and therefore will not be subjected to these tariffs.
The tariffs, however, will create a pricing environment in which the firms that operate inside the Eurozone will actually price accordingly.
So either way you cut it, the new regulatory arrangements in terms of these tariffs is going to drive prices up.
And those prices will affect not only ordinary household consumers, but also affect enterprises.
None of that is helpful actually to either repairing the problems of industrial hollowing out or contributing to Europe's own ambitions in relation to a green transition.
Well, if we look at other voters in this era of related issues, very interesting is that Spain along with 11 other EU member states abstained from voting.
So why do we see so many abstentions with 10 in favor, 5 against and 12 abstaining?
I mean, how divided were EU member states on this issue?
So first of all, I think I completely understand, like, for example, France's decision, both because of its political pressures.
So Spain has also been subject to some Chinese investigations of pork imports.
That's actually the amount is quite significant, it's 1 .5 billion.
So I'm a little surprised why Spain appeared in the list of abstention.
For the other countries, I think mainly they're coming from the point of view, you know, of staying neutral, because themselves are not either not importing a lot of cars from China, or they don't have a strong automobile industry.
So yeah, I'm not very surprised about the list of abstentions.
Maybe Belgium, if you look at Belgium, as I just said, Belgium is one of the countries that when it's the largest increase in imports of Chinese EV makers, but it's not choosing to support the bill.
So I think if you look at the list, it kind of gives you a lot of different interesting takes on the dimensions, the dynamics of politics between countries in the European Union.
Helga, what do you make of Germany's role in this whole process?
As the region's biggest economy and major car producer, Germany voted against the proposal, but failed to get enough opposition to block the deal, which would have required objections from at least the 15 nations, representing 65 % of the world.
So let's continue. What more do you think maybe Germany could do to mitigate potential trade friction between China and the EU?
Well, I would hope so.
I think that now, belatedly, all the key industry associations and also car makers have come out protesting against the tariff policy, but also in general demanding a change in government policy in respect to energy prices and various other things.
This comes very late.
I was always thinking, given the fact that the Germany economy is in such terrible condition with many firms, middle level industries going abroad, either because of the US offering the Inflation Reduction Act and actually luring German industries into investments in the United States, which goes to
the disadvantage of Germany.
Or firms going to invest in China because the climate and energy prices are just more advantageous.
But this means that the German economy is really suffering right now from acute de -industrialization.
And it took quite a while until these car makers and other industry associations finally started to really speak out.
I mean, I would have assumed that they would have protested a lot more louder and stronger because the very existence of Germany as an industrial state is at stake.
So finally, they are now speaking out.
And I can only hope that they will increase the pressure on the government to fight for this.
I mean, what this vote also shows is that the famous unity in the European Union is not so unified at all, which you can also see on many other issues, like the whole relationship to China.
I think that Ryan and Prime Minister Oban, you know, the EU Union is not at all there.
And I think the Europeans need to really rethink where they are going, because what we see right now is a gigantic realignment.
You have the emergence of a whole new economic system with the BRICS countries.
They will have a summit this month in Kazan, in Russia.
Many countries from the global South are either joining or have indicated that they want to join.
And that is where the growth of the future economy is.
You have emerging markets, you know, part of the global South, which is becoming now the global or has become the global majority already.
Even Chatham House put out figures saying that the global South represents 88 percent of the world population.
You look at countries like Indonesia, for example.
Indonesia will soon bypass the German economy as the third largest economy in the world.
Other countries are growing as well in large part due to the collaboration with the Belt and Road Initiative, which has started many, many high technology projects.
You have past trains in Laos, in Indonesia, which are in better shape than those in Europe.
So it is the question of survival of Europe to orient towards these growing markets in which China plays obviously the leading role.
So I think it requires a rethinking of the German industrialists, you know, where do they think they have a future if they submit to pressure, political pressure to decrease the relationship with China, which means Europe will not survive as a competitor of speaking of or will they reorientate towards
the global majority.
And that will also then determine the policy towards China.
Professor Powell, in response to EU's moves, actually, China had already filled a complaint with the World Trade Organization over this tariffs on Chinese EVs.
And also, China says, EU's measures seriously lacked factual and legal grounds and clearly violated WTO rules.
So what role do you see for international organizations like the WTO in mitigating tensions related to these tariffs and facilitating dialogue between EU and China?
The WTO has largely been hamstrung in its capacity to resolve significant trade disputes, largely because five years ago, the United States refused to approve the appointment of new personnel to the appellate body.
So in terms of the formal dispute resolution mechanisms of the WTO, they have been seriously impaired as a result of that.
The WTO nonetheless creates an environment, I guess you can say, where parties can at least engage hopefully in good faith to work through the issues that have resulted in conflicts arising between them, and hopefully in an environment that encourages negotiations in good faith that the parties will arrive
at a mutually agreeable outcome.
In the meantime, of course, we have to let time take course because these processes don't happen overnight.
A lot of information needs to be pulled together.
The parties will need to agree on how they want to proceed with the negotiations and discussions.
And ultimately, I think particularly on the European side, there are some fairly complex and delicate internal political matters that need to be worked through.
Clearly, the voting outcome shows that the EU member states are very divided on this question, in part because each member state has its own economic structure, and therefore its own sense of its economic interests, but also because there are wider geopolitical issues now sitting in the backdrop of how
European nation states and the European Commission are judging their particular responses to global dynamics.
So it's a complex and fluid environment.
The WTO's own infrastructure is constrained by the virtue of what the US has not done for the past few years, but that the fact that the parties are still willing to talk to each other and explore options to negotiate a consensus is something to be encouraged.
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Welcome back. Let's continue our discussion.
Professor Li, how will these tariffs affect the China EU trade and bilateral relations?
And also with the ongoing negotiations and also the need for collaboration in achieving climate goals, how can the EU and China fund common ground to address their mutual interests in their EV market?
I think the worst case scenario is, of course, as the Hungarian Prime Minister Victor mentioned, these actions could lead to an economic cold war between the EU and China with the escalation of Chinese anti -dumping inquiry into pork and grandi.
There's more a better case scenario is maybe through, for example, Germany and through other countries that would like to push negotiations towards a more mutually agreeable solution, find a middle ground either to join venture with local car manufacturers or to find a more acceptable solution.
Otherwise, if we let this escalation keep going on, I don't think it's going to be beneficial for either country's economic outlook in the future.
So Helga, what's your assessment on the worst and the best scenario as Professor Li has just mentioned?
Oh, the worst scenario is not a pretty one because I think it's related to the geostrategic situation.
We are looking at two regional crises, one in Ukraine and one in southwest Asia, which both have the potential to escalate and lead to a larger regional and potentially even a global war.
In that case, the question of EV cars becomes mute because that will be the really worst scenario.
So the best scenario on the other side would be that the Europeans and the United States respond to the discussion by President Xi Jinping, who always talks about a shared community of mankind because we are actually sitting in one boat.
This is the first time in history where you cannot divide the destiny of humanity for many reasons.
You have nuclear weapons, you had the pandemic, you have the internet.
All of that means we are extremely closely connected and if one part of the world goes under, the likelihood that it will pull the whole rest of the world with it is very high.
So I would think that if the Europeans and hopefully even the United States will work with China on a joint new system, like the Global Security Initiative, Global Development Initiative, and the Global Civilization Initiative, which really is a new security and development architecture for the whole
world. And I think we are heading towards a situation where that choice has to be made, either catastrophe or a new paradigm.
So I think these are two very diametrically opposed options, but I think there is no middle ground.
Professor Powell, your take on that.
Yeah, look, as Helga mentioned, the worst case scenario, of course, is an expansion of the hot conflicts that are currently taking place in Ukraine and in West Asia, which would, of course, make all of these economic discussions rather moot.
But assuming that we don't see that, or at least we put that aside for the purposes of this discussion, I think that the worst case scenario is for the European technocratic leadership to pursue a politically inspired position rather than address the economic circumstances of Europe through considered
rational analysis, which would ultimately lead to policies that run the significant risk of not just causing short -term negative effects on local consumers, whether they're households or enterprises, but in the medium term, creating an environment in which the European economy, broadly speaking, does
not get to benefit from access to low -cost intermediate goods and other input factors, that would be the worst case scenario.
The best case scenario is for a mutually agreed outcome to be achieved through negotiation.
The most sensible outcome, of course, is for Europe to embrace the opportunities of low -cost, high -technology Chinese vehicles, both as vehicles manufactured in China and export Europe, but also seek to actively encourage the formation of joint ventures and other foreign direct investment opportunities
for Chinese technology and know -how to be established within the Eurozone to assemble and manufacture motor vehicles for the European market.
Now, that's taking place, of course, in Hungary and also through joint ventures in Spain, for example, and we know that Prime Minister Maloney of Italy has been reaching out to BYD to sound them out as far as establishing a plant in Italy is concerned.
So, that kind of initiative, which actually starts to distribute productive capabilities and expand the footprint of Chinese technology know -how into the Eurozone, would be a win -win outcome.
And this is the one last question for all of you.
So, as we've seen, the negotiation keeps on going.
So, what steps do you think you and China should take to mitigate tensions and foster a more cooperative trade relations in the EV sector moving forward?
Yeah, I think my advice for policymakers and whoever involved in the negotiation is that for European Union and for European leaders to understand that in order to build a healthy industry in EV, we need to expand the user or the number of electric vehicles first.
And in order to do that, I think to have an open mind and to embrace imports from China is a necessary step.
Only when you have done that, you can start to build a better infrastructure.
You can start to have a more healthy environment and reduce the CO2 emission and achieve all your environmental and economic goals.
So, protectionism isn't the solution.
It's always the problem.
I think that if both sides, the EU and China, would agree that the degrees of freedom are not in protectionism, but in increase of science and technology.
That's the unique capability of the human mind, that it can produce new scientific discoveries all the time and leading to new technologies and that is an unstoppable process.
China has gone on that road.
China focused on innovation.
In the meantime, China is of 44 areas in the world in 37 leading and it has increased the number of percentage of patents also to a leading position.
So, Europe used to do that also, but because of an ideology which was very much zero -gross and wrong understanding of ecologism, Europe is lagging behind.
So, the solution is not protectionism.
The solution is go back to a scientific and technological orientation and then concentrate on joint ventures in certain markets.
There are huge markets developing in Asia, in Latin America, in Africa and joint ventures to help these industries to industrialize and become modern where poverty and underdevelopment is eliminated.
That is a huge area for cooperation.
So, the solution is in the future orientation of science, technology and cooperation and not protectionism.
Professor Powel, how about you?
What's your thoughts on further steps that China and the EU could do to avoid those conflicts and to build a more inclusive and cooperative trade relations?
A lot of this comes down to mindset to begin with.
We started this discussion with considerations around the political dimensions of this current set of disputes.
It raises questions about the mindset of the European Commission in particular in relation to how it views the future economic prospects and trajectory of the Eurozone economies as well as how those considerations intersect with concerns around security.
It does require a new model.
It requires Europe and the EU to exercise their own imaginations about what a future in which China continues to play a large and growing role in terms of high technology, science and innovation.
Now, as Helga mentioned, the opportunities for collaboration are actually significant.
We have seen over the last quarter century or more that the more open the trading and exchange of knowledge and ideas has been the greater the benefits there have been for all concerned.
Europe is going to need to find ways of adapting to the new world and it means it needs to be committed to empowering its citizens through training and education with the kinds of skills necessary to take advantage of what these new arrangements bring rather than put up the defensive shutters and hope
that what's going on in the outside world won't affect Europe.
That's it for this episode of the chat lounge.
I've been speaking with Professor Li Luen, Assistant Professor of Economics at Peking University, Helga Zebler -Rouge, founder of the Schiller Institute, a Germany -based think tank and Professor Warwick Powell, Senior Fellow at the Taikou Institute and adjunct professor at Queensland University of Technology.
Thank you for listening.
Have a great weekend.
Thank you.
