Who is deliberately provoking a "trade war"?

In the past two days, in response to the European Commission's preliminary ruling on anti-subsidy investigation on Chinese electric vehicles, Tan Zhu continued to release exclusive information, which attracted great attention from Western media.

Tracking their reports, we can find that the information points most frequently quoted by Western media are all related to China's countermeasures:

｜｜When BBC and the British Daily Telegraph quoted Tan Zhu's report, they both used "Chinese automakers urge the Chinese government to raise tariffs on large-displacement gasoline cars in Europe" as their headlines;

｜｜Bloomberg and other media paid attention to the report by Tan Zhu that "the industry called for the "toughest measures" against Europe" and the possible losses faced by European automakers;

｜｜The Wall Street Journal and Radio France Internationale are paying attention to the progress of China's anti-dumping investigation on brandy against Europe mentioned by Mr. Tan.

In fact, the European Commission itself is also paying attention to China's movements. In response to China's continuous release of countermeasures, the European side said:

The EU is unwilling to initiate a "trade war", but China's actions are provoking a "trade war".

What I mean is, I can hit you, but you can't hit back.

To this day, the European Commission still attempts to claim that it is acting within the framework of the WTO and to pin the blame of "initiating a trade war" on China.

Mr. Tan made an in-depth analysis of the statements made by relevant European figures, followed up and investigated reports from the United States and Europe, and uncovered the real driving force behind this dispute.

According to the European Commission, the reason for launching an anti-subsidy investigation into Chinese electric vehicles is that China's electric vehicle industry "threatens" Europe.

According to the data, in the first four months of 2024, China's share of Germany's electric vehicle market rose to 40.9%, making it the largest importer of electric vehicles in Germany.

Logically speaking, Germany should be the country that can feel the "threat" and "impact" from China the most. However, Germany has always been opposed to the European Commission's imposition of tariffs on Chinese electric vehicles.

Before his recent visit to China, German Vice Chancellor and Minister of Economy Habeck specifically released Germany's attitude to the media:

China is Germany's partner in all areas.

Germany, which has such close ties with China's electric vehicles, does not feel "threatened". So where does the "threat" come from?

The timeline can be pushed back to before the European Commission makes a decision.

Using big data, Tan Zhu analyzed reports on "Chinese electric vehicles" in the media of the 27 EU countries since 2023. There was an obvious peak in reports on the day when the European Commission announced the launch of an anti-subsidy investigation against Chinese electric vehicles.

But looking at the reports throughout 2023, the words "tariffs", "investigations" and "subsidies" were not the themes of media reports on "Chinese electric vehicles" in most EU countries.

Most reports still focus on the development of their own industries. Take the German media, which has the highest amount of reports, for example. In 2023, the most frequently reported topics in German media reports were "batteries", "growth" and "investment capital". By 2024, topics such as "batteries", "transformation" and "high-quality development" continued to appear.

The German media pays special attention to topics such as "investment" and "growth". Behind this is the transformation dilemma faced by German and even European automakers in the past year.

Due to the tightening of fiscal policy, in 2023, the German government gradually reduced consumer subsidies to encourage the purchase of electric vehicles, which reduced market demand. At the same time, high inflation has kept the manufacturing costs of electric vehicles in Germany high.

In this context, reducing the manufacturing costs of electric vehicles is the most effective way for European automakers, including German automakers, to achieve transformation.

Correspondingly, we can see in the data that in reports with high media reach in Germany, the Netherlands, Ireland and other countries, the characteristics of Chinese electric vehicles, namely, "high quality and low price", were mentioned. European industry insiders even bluntly stated that without China, "there would be no energy transformation."

European automakers have chosen to hone their cost control and production capabilities through cooperation with China.

However, at the same time when European car companies were in trouble and struggling to seize the opportunity of transformation, the European Commission began to release news that it would impose additional tariffs on Chinese electric vehicles.

According to the EU's explanation, the European Commission's judgment that Chinese electric vehicles pose a "threat" was derived from media reports.

I just mentioned that there is no relevant content fermentation in the reports of 27 EU countries on Chinese electric vehicles. So what reports are these people in the European Commission reading?

During the same period, the American media mentioned this topic most, with more than 113,000 reports.

The first peak of US media reports was from March to April 2023. The cause of the incident was that the US and Europe were discussing solutions to the problem of the abuse of subsidies in the US "Inflation Reduction Act" that harmed the interests of the EU industry. However, in their reports, the US media also began to "link" the so-called "subsidy" problem in China's electric vehicle industry.

After this discussion, James Bachik, assistant director of the European Center of the Atlantic Council, a US think tank, was the first to mention the word "subsidy". He said, "Reaching a consensus on the diversification of the electric vehicle battery supply chain is an important step in US-EU relations. Any move to avoid a subsidy war is meaningful."

The word "subsidy" began to appear in European media reports on Chinese electric vehicles.

Subsequently, two senior European Commission officials revealed in a media interview that the European Commission's department responsible for trade protection measures is discussing whether to launch an anti-subsidy investigation into Chinese electric vehicles.

According to the research of professional organizations, a reporter named Stuart Liu from the European edition of Politico also helped release news that the European Commission would launch an anti-subsidy investigation against China and impose tariffs on Chinese electric vehicles. This became a key communication node in the public opinion field.

Interestingly, it was not only European journalists who released the news in cooperation with the European Commission, but also American media. The American media took the lead in launching an information bombardment, setting off multiple rounds of reports hyping up the "subsidy" issue.

In comparison, the peak of European media reporting came later. It was not until von der Leyen officially confirmed that an investigation would be launched that European media published concentrated reports on "Chinese electric vehicles" and "subsidies" for several days.

Seeing that the topic of subsidies alone could not attract much attention, American consulting firms subsequently released reports one after another, saying that "imposing a 50% tariff on Chinese electric vehicles is a 'necessary condition' to stop Chinese automakers."

These actions became the "reasons" for the European Commission to take action.

In order to find out the deeper thoughts of the European Commission, Mr. Tan found the people who were actually conducting the anti-subsidy investigation against China.

Mr. Tan analyzed the reports on "China", "subsidies" and "electric vehicles" in European and American media over the past year and found that a man named Dennis Redonne was frequently mentioned.

He is the chief trade enforcement officer of the European Commission. A year before this position was established, the US government announced a 25% tariff on steel imported from the EU and other places and a 10% tariff on aluminum imported on the grounds of national security.

After the tariffs were imposed, the EU’s steel exports to the US dropped by 4.55 million tons, nearly halving from before the tariffs were imposed. Since then, the EU has not found new buyers, and the steel industry has been severely damaged.

These matters were originally handled by the European Commission's trade commissioner. The US's actions have sounded the alarm for the EU, which needs a role with more experience in law enforcement to take on the challenge.

Against this background, the European Commission established the position of Chief Trade Enforcement Officer and Denis Redonne was appointed as the first Chief Trade Enforcement Officer.

The anti-subsidy investigation against Chinese electric vehicles is Dennis Redonne's greatest "political achievement" since he took office. And Dennis Redonne's approach can be regarded as "learning from the strong points of the foreigners to control the Chinese" - all learned from the Americans.

European media used this sentence to evaluate Dennis Redonne's approach:

This transformed the EU from the world's most open trading bloc into a heavily defended "economic fortress."

The European Commission has also been labeled a “geopolitical commission”.

Behind this, what best reflects the European Commission’s change of thinking is the core of the anti-subsidy investigation - the understanding of "subsidy".

Take the European Commission's initiative to initiate an investigation as an example.

Countries set up proactive clauses in their anti-subsidy legislation, but they did not intend to use it as a major remedy. Ding Ru and Tan Zhu, who have been tracking the development of international subsidy rules for a long time, shared a detail:

The WTO free trade rules intentionally leave countries with such a policy space, which is a technical blank. If there is no reservation, countries will not be willing to join the WTO free trade arrangement.

In other words, the purpose of retaining the initiative to initiate anti-subsidy investigations is to promote globalization. This can also be confirmed in the official statement of the European Commission. According to the European Commission, trade defense measures such as anti-subsidy are originally intended to "maintain the open market and free trade of the European Union."

However, the European Commission's understanding of trade defense measures has gradually deviated, which can be clearly seen from the development of the European Commission's anti-subsidy rules.

Ding Ru told Tan Zhu that generally speaking, subsidies refer to direct government financial support or tax exemptions. However, starting more than a decade ago, the EU's investigation into China's "subsidies" has gradually expanded to include electricity, land, loans, and upstream raw materials provided by state-owned enterprises. This has far exceeded the scope of traditional anti-subsidy investigations and is also an abuse of existing WTO rules.

In 2020, the European Commission completed the world's first third-country subsidies case, which also identified Chinese state-owned enterprises providing subsidies to third-country companies as within the scope of the European Commission's anti-subsidy measures.

After this subsidy case, the European Commission began to work on legislation and finally passed the Foreign Subsidies Regulation in 2023, further including foreign companies' investment in Europe in the scope of the European Commission's anti-subsidy investigation.

It is precisely because the European Commission has continuously expanded the application of anti-subsidy measures that we can see that in the past two years, the frequency and density of the EU's anti-subsidy investigations against China have been the highest in history.

As the spokesperson of China's Ministry of Commerce said, the EU has constantly provoked trade disputes. Since 2024 alone, the EU has intensively introduced 31 trade and investment restrictive measures against China, including 25 trade relief measures. It has also launched investigations into China's foreign subsidies regulations and international procurement tools, seriously interfering with China-EU economic and trade cooperation.

There is a special theory about the European Commission's use of regulation to influence foreign companies and regulate the market, called the "Brussels Effect." It says that the global competitiveness of European companies is declining, and at this time, Europe can change the behavior of global companies and maintain its influence in the international community by investing in regulatory legislation.

Initially, the "Brussels effect" was used in areas such as data privacy, because there were legislative gaps in these areas and there was a need for legislative regulation. However, in the field of anti-subsidy, there are already WTO rules.

At this time, the European Commission proposed new anti-subsidy rules with a strong protectionist color, using the "Brussels effect", which will actually only result in a regression of international free trade.

The United States has learned from the European Commission to expand the scope of anti-subsidy and abuse anti-subsidy. This year, the United States has revised its anti-subsidy regulations to include a market tracing section. Regardless of whether the company has Chinese investment or uses Chinese products in the upstream of the industrial chain, as long as it has some connection with China, the United States can launch an anti-subsidy investigation on the relevant company according to the new anti-subsidy regulations.

It can be seen that anti-subsidy has become a pretext for imposing tariffs. When tariffs are abused, a "trade war" will break out.

China certainly does not want to see such a situation. Tan Zhu learned that China has communicated with EU institutions and 16 member states including Germany and France more than 80 times through meetings, talks, phone calls and letters.