EU and China agree to curb Chinese hybrid car exports to Europe

The European Union and China reached an agreement on Friday that will curb China's hybrid car exports, Politico Europe reported. The announcement came as Trade Commissioner Maroš Šefčovič wrapped up two days of talks in Beijing. Šefčovič said the two sides had reached "a shared understanding to moderate China's export of hybrids and plug-in hybrids to the European Union."

Šefčovič said the agreement "opens the prospect of cutting China's exports by more than a half," an estimate he said was based on projections of how Chinese exports would grow over the next four years without a deal. In practical terms, he said it would prevent "several millions of car exports from China to the European Union." He declined to enter into specifics before EU leaders officially mandate the EU executive to move forward.

China's Commerce Ministry highlighted the understanding on hybrids in a parallel 16-point statement but offered no details on how exports would be restrained, according to Politico Europe. It said the two sides "will continue to strengthen communication and cooperation under the trade monitoring mechanism." Šefčovič declined to elaborate when asked whether the deal would allow the EU to impose safeguards, a mixture of import quotas and tariffs that Brussels has been considering, and said the arrangement would comply with World Trade Organization rules.

Šefčovič said Beijing had also agreed to lower duties on European goods worth €4 billion, ranging from olive oil to footwear, a move he said would save exporters €225 million. He called it "a crucial first step" in the process of rebalancing. He said he would report back to European Commission President Ursula von der Leyen and EU leaders when they meet for a summit in Brussels next Thursday.

Politico Europe reported that Chinese auto exports to Europe accounted for one in eight cars sold in the bloc in August, mainly driven by hybrids. It reported that Volkswagen and Mercedes-Benz have announced job cuts and plant closures. Beijing also said in its statement that it was "willing to continue" fast-tracking licenses to export rare earth elements to the EU, and Šefčovič said the two sides reached a shared understanding to facilitate China's export licensing for rare earths and permanent magnets.

FAZ reported that Beijing has committed to halving hybrid vehicle exports to the EU within four years, and that relief in Europe is great, but wrote that it is "completely open" what the agreement reached on Friday is worth, because the details are not yet known and it is unclear how the EU can control and ensure that Beijing keeps its commitments. FAZ noted that China systematically circumvented an earlier agreement limiting imports of solar panels. FAZ reported that both sides plan to continue talks in January and that optimists expect a broader concept for export limits covering other sectors could be ready by March, while it wrote that it is equally likely that China is only stalling the EU with what it called apparent openness and sham promises.