The multilateral trade system is facing increasing challenges, from geopoliticisation to securitisation. EU-China trade relations have been in constant change over the past decade. Recent measures from both the EU and China might suggest possible tensions and the development of new trade disputes.

In October 2023 the European Commission started an investigation into the battery electric vehicles value chain in China. On 12 June 2024, the Commission provisionally concluded that China unfairly subsided these value chains, breaching international trade rules. On 5 July the European Union (EU) imposed provisional duties of up to 37.6 percent on electric vehicle imports from China The EU has four months to issue a final decision on the definitive duties pending a vote by its Member States.

The EU’s new measures  

This decision comes only a few weeks after the publication of a working document on China’s trade distortions. More specifically, on 10 April, the European Commission had already released its new working document “on significant distortions in the economy of the People’s Republic of China for the purposes of trade defence investigations.” The purposes of this document are multiple. It is a document of more than 700 pages that reports Chinese and European policies, contrasting them in light of international trade rules and highlighting possible market distortions from China against European businesses. On a practical level, the European Commission compiled this document to help European businesses in their complaint against Chinese rules. This is in line with the EU’s commitment to an open and transparent international trade system. While it is true that European businesses can ask the European Commission to initiate investigations due to unfair practices in international trade, this system has hardly been used. Why would the European Commission issue such a large document? The release of the working document and the announcement of the new duties on electric vehicles from China suggest a more aggressive approach to trade policy.

Rehashing the past? The Solar Panel dispute

According to EU officials, this measure marks a change in the EU’s trade policy strategy, as it tries to avoid the situation created by the “Solar Panel dispute.” The “Solar Panel dispute” was the widest anti-dumping investigation in the history of the EU Commission, initiated in 2010, ending only in 2018.

What is commonly referred to as the Solar Panel dispute is, in fact, a prolonged set of policies and measures adopted by the EU Commission and the Chinese Government on products related to solar panels. It is not one single major dispute in a strictly legal sense but refers instead to different domestic and international legal disputes and actions that have been pursued by both parties. The Solar Panel dispute, then, can be more easily referred to as a Solar Panel war. Nonetheless, what is interesting to highlight is that China, as one of its first acts in response to the EU’s investigation on solar panels, requested consultations of the World Trade Organization dispute settlement mechanism, activating the system. China showed initiative in the international arena, alerting the designated authority in the international system. Even though the Solar Panel dispute was resolved bilaterally, it can be argued that the dispute was initiated through the World Trade Organization dispute settlement mechanism.

The Solar Panel dispute indicates one of the major turning points in EU-China relations. For the EU, the Solar Panel dispute was one of the largest investigations by the EU Commission. For China, it was one of the first major moments of friction since joining the World Trade Organization. On a political level, the Solar Panel dispute was resolved bilaterally, indicating the commitment of the two parties towards a rules-based multilateral trade system and amicable relations. However, a lot has changed since 2018. In 2019, the European Commission in its Strategic Outlook included for the first time the term “strategic competitor” to describe China in international trade.

China’s response

China’s response to the announcement of duties of up to 38.1 percent on electric vehicles could initiate a new dispute, if not a war. The Chinese government has already stated that it is preoccupied with the EU’s “protectionist” measures, doing whatever possible to “firmly safeguard” their rights. Indeed, only a few days after the European Commission’s announcement, the Chinese government started a new anti-dumping investigation on pork imported from Spain, France, and Denmark. China imports 50 percent of its pork from the EU. A tariff on this product could have a major impact on European producers for a business worth US$6 billion in 2023.

However, this is not the only measure China has started since the European Commission announced its own investigation last October. China has already started an investigation into French brandy in April 2024. This came only a few weeks after a recent reform of China’s Tariff Law that grants the Chinese government stronger powers of retaliation against the unfavourable treatment of Chinese products. While the consequences of these measures are yet to be clear, it is certainly evident that EU-China trade relations will be deeply affected.

Dr Salvatore Barillà is a Research Associate at the Centre for Rural Economy at Newcastle University. He holds a PhD in Politics from the University of Edinburgh. His research lies at the intersection of international political economy, international trade dispute settlement, European and Chinese studies, economic and legal ideas in international relations, international law, and food security and agriculture.

This review article is published under a Creative Commons Licence and may be republished with attribution.