Linha de produção da BYD, fabricante de carros elétricos, em Shenzhen, Guangdong, na China As from October 1st, electric cars entering Canada will have to pay 100% import tax. The measure has been studied since July and follows a decision by the United States, which has been adopting this tariff for months. Europe has also been taxing in this way, imposing a 48% tax on Chinese electric cars since June.
The reason Western countries are giving for doing this, is that China is carrying out dumping, that is, selling electric cars in the foreign market at prices below the cost of local production, due to subsidies funded by Beijing. “This practice is seen as unfair competition, as Chinese products arrive in the Western market with prices that do not reflect the real costs, as a result of Chinese government subsidies”, explains Alexandre Pires, teacher at Ibmec SP.
Dumping is a trade practice that is considered dishonest, as it can lead to market distortion, weakening competition and potentially resulting in monopolies. This maneuver is usually used to gain market share abroad, by making products more competitive in terms of price and, often, harming local manufacturers, who cannot compete with the low values.
To defend themselves against this strategy, the option that countries have in hand is to adopt anti-dumping measures, such as tariffs and additional taxes, to protect the national industry.
The Chinese response
The Chinese embassy in Ottawa counter-attacked, calling the Canadian decision a “typical act of trade protectionism and political domination”, in disagreement with the rules of the World Trade Organization (WTO). In addition, it stated that China will take all necessary measures to protect its economic interests.
Geoeconomics
According to Pires, the massive influx of Chinese electric vehicles into the global market is an example of how geoeconomics is replacing geopolitics in international relations. While geopolitics uses geography and politics as tools of power, geoeconomics uses trade transactions, investments, and sanctions.
In the current scenario, trade barriers are only expected to increase. “The divorce between China and the United States is the greatest symptom of this new era of global economic separation,” says the professor.
Sources: Valor Econômico, Estadão and O Globo.
