According to a report by the German newspaper 'Handelsblatt' on October 30th, German Chancellor Merz was surprised by the strong criticism from Asian trade partners against the proposed 'EU-made' regulations for automobiles.
Just two weeks ago, Mertz reached an agreement with French President Macron at the EU summit in Brussels to significantly tighten regulations regarding the automotive industry. Now, this initiative is facing opposition in Japan, South Korea, and Singapore.
Mertz said on Friday that the intensity of the criticism was "somewhat surprising." Relevant national leaders expressed strong concerns, believing that Europe might trigger a new wave of protectionism, which would keep foreign competitors out.
Mertz said, “No matter where I go, I challenge these views and strive to eliminate these concerns.” He emphasized, “We must remain open and competitive. Only in this way can German companies continue to successfully sell their products in the Asian market.”
Mertz announced that he would bring these criticism back to Brussels. He said, “Of course, I will raise this issue at the next European Council meeting, indicating that I have heard very strong concerns here. I take these concerns seriously and will also bring them back with me.”
This means that, at least in terms of words, Mertz’s attitude has changed compared to two weeks ago. At that time, he reached an agreement with Macron in Brussels on a comprehensive automotive industry deal. Mertz pushed for further relaxation of the regulations related to the phased elimination of gasoline vehicles. In exchange, he agreed to France’s demand to tighten the ‘EU-made’ regulations. These regulations are aimed at protecting jobs in Europe.
According to the plan, government subsidies such as car purchase incentives will only be granted to cars that are assembled in Europe, and where at least 70% of the components have their value created in Europe. The UK will receive an exception, but only if London maintains its trade defense and investment rules consistent with those of the EU, in order to prevent Chinese manufacturers from obtaining EU subsidies through the UK.
In contrast, if Japan, Korea, and other Asian car-producing countries cannot meet the requirements for production and value creation in Europe, their cars will not be eligible for EU subsidies.
In fact, even before Mertz set off for an visit to Asia, it was foreseeable that these plans would face opposition from Asian countries. Shortly after Germany and France reached an agreement on October 16th, Japanese automaker Toyota demanded that the special treatment granted to the UK be extended to Japan, Turkey, and other close trading partners.
On Tuesday, before Mertz arrived in Tokyo, Japan's Minister of Economy, Trade and Industry announced that Germany would be explicitly warned against discriminatory treatment of Japanese electric vehicles. On Wednesday, Japanese Prime Minister Shinzo Abe personally expressed concerns about the EU's "Industry Accelerator Act" to Mertz. This act aims to strengthen Europe's industrial strength.
On Thursday, South Korean President Li Zemin also expressed similar concerns. After meeting with Mertz in Seoul, Li Zemin stated that he had explicitly requested Mertz's support to ensure that South Korea would receive treatment equal to that of EU member states under the proposed EU legislation framework.
The EU has signed comprehensive free trade agreements with Japan, South Korea, and Singapore. At the same time, facing the trade protectionism policies implemented by U.S. President Trump and China's growing economic strength, Mertz hopes to strengthen cooperation with these countries.
On Tuesday in Singapore, Mertz himself proposed the establishment of a global alliance of like-minded countries to strengthen the rule-based trading system. He believed that European nations should promote closer integration among existing trade agreements and aim to reach a large cross-regional trade agreement over the long term.
Faced with opposition from Asian countries, Mertz did not clarify his intentions regarding relaxing the rules agreed upon with Macron earlier. He did not announce any changes to the joint positions of Germany and France. However, he promised his Asian partners that their objections would be taken into consideration in subsequent EU negotiations. As early as Wednesday, Mertz stated in Tokyo that the Europe-first policy would apply only to the automotive industry and public procurement sectors.
However, the EU Commission’s ‘Industrial Acceleration Act’ also plans to apply similar regulations to other industrial sectors. On this issue, Berlin is pushing for equal treatment for partner countries. For example, heat pumps produced in Asia should also be eligible for purchasing subsidies in Europe.
It is worth noting that German President Frank-Walter Steinmeier also visited China this week. In Beijing, he stated that Europe welcomes China's development, but hopes for a more fair and mutually beneficial economic and trade relationship between the two sides. He said that Europe does not want to lose its industrial base, nor can it accept being unilaterally dependent on China.
"Our goal as Europeans is clear: We do not want to decouple from China." said Steyin Meyer. Europe hopes to solve trade disputes through dialogue, and continue bilateral trade for mutual benefit.
However, he also stated that Europe has both goodwill and clear expectations regarding China’s rise. “We are not worried about China’s rise. What we care about is how China will rise.”
In fact, in response to the EU’s ‘Industrial Accelerator Act’, China officially submitted comments to the EU in April this year, expressing China’s official position and serious concerns.
The Chinese side believes that the legislation imposes numerous restrictive requirements on foreign investment in four emerging strategic industries: batteries, electric vehicles, photovoltaics, and key raw materials. It also includes exclusive clauses requiring products to be ‘of European Union origin’ in public procurement and public support policies, creating serious barriers to investment and systematic discrimination.
In the comments, China suggested that the European side remove discriminatory requirements, local content requirements, mandatory transfer of intellectual property and technology requirements, and public procurement restrictions from the bill. It is hoped that the European side will pay close attention to and seriously consider adopting China's suggestions, strictly comply with WTO rules, and avoid discriminatory measures.
China will closely monitor the legislative process and is willing to engage in dialogue and communication with the European side on this matter. If the European side ignores China's suggestions and insists on passing such laws, thereby harming the interests of Chinese enterprises, China will have no choice but to take countermeasures and firmly safeguard the legitimate rights and interests of Chinese enterprises.
