China's oil-rejection hybrid vehicle export quota sets EU-China trade talks on the rocks, raising alarm bells

The EU's chief trade envoy held two days of negotiations with top Chinese officials on the 8th to avoid an escalating trade conflict. However, after it was reported that China rejected the EU's proposal on the 7th to voluntarily restrict the export of gasoline-electric hybrid vehicles to Europe, the prospects for negotiations are pessimistic. Sources revealed that the EU has considered taking safeguard measures to reduce its continuously expanding trade deficit.

During his stay in Beijing, EU Trade Commissioner Maros Sefcovic will meet with Chinese Commerce Minister Wang Wentao and ask him to take concrete actions to solve the daily trade deficit of more than 1.1 billion US dollars. The scale of this deficit has angered many EU countries, which believe that the influx of low-priced Chinese imports has caused the loss of millions of manufacturing jobs in Europe and impacted European society and industry.

Germany and France earlier this week urged the EU to adopt tougher tools and, if necessary, cut off China's access to the EU single market to protect European industries. Alicia Garcia Herrero, a senior researcher at the European think tank Bruegel, said, "This shows a major change in the position of the European Commission on EU-China trade negotiations."

The Financial Times reported that Sefcovich originally proposed to China to limit the export of gasoline-electric hybrid vehicles from more than one-third of the European market to 15%, otherwise it would face retaliatory measures such as tariffs. However, EU officials informed member states on the 7th that China has rejected the bill.

The Executive Committee is currently discussing temporary trade protection measures that would allow China to export a certain amount of cars and impose high tariffs on excess quantities. EU diplomats revealed that the two sides privately hope to reach a quota acceptable to China to avoid Beijing's retaliation.

After the EU imposed a 35% tariff on Chinese electric vehicles on top of the normal 10% tariff, China's exports of gasoline-electric hybrid vehicles to the EU soared. European officials said that if the issue of hybrid vehicles is not resolved, trade negotiations may fail, leading to a serious trade conflict, because the EU has shown that the daily trade deficit of more than $1.1 billion cannot be sustained.

Bloomberg reported that insiders revealed that the European Commission plans to use gasoline-electric hybrid vehicles as a test. If the import quota measures are effective, they will be extended to other industries that the EU considers trade imbalances. Sefcovic said last week that China's imports of nearly one-quarter of the EU's products have increased at a worrying rate, including abnormal growth in imports of machine tools, textiles, basic metals and chemicals.

Beijing is showing its willingness to expand direct investment in Europe and increase European imports as it refuses to reduce exports. China also hopes that the EU will lift export controls on technology including ASML chip manufacturing equipment.