Minimum import prices for China's electric cars: “The worst of all solutions”

"A minimum import price is the worst of all solutions—for three reasons.

First, a minimum import price does not eliminate the underlying surplus supply but rather cements it. Instead of dampening market pressure at the border, the instrument invites China's electric car manufacturers to continue pushing large quantities into the EU market. Incentives for overcapacity are not being reduced but rather strengthened and politically approved.

Second, a minimum import price is a bureaucratic monster and opens a massive scope for lobbying. The Commission requires model- and equipment-specific minimum prices, demarcations along complex distribution channels, and safeguards against cross-subsidization, for example through discounts or other purchase incentives. This is an invitation to ongoing negotiations and turns trade defense into a continuous arena for regulation and lobbying.

Third, the highlight, however, is that with such a measure, the EU is forfeiting substantial revenues. Tariffs create a price wedge and generate government revenue. A minimum import price creates the same price wedge, but the difference becomes an additional margin for Chinese manufacturers and their distribution systems. Europe enforces the measure, bears the administrative costs—and effectively transfers the revenue to the car manufacturers it claims to be taking action against.

If the EU is serious about trade defense measures countering export subsidies that are prohibited under WTO law, it should stick to transparent, market-based instruments that typically go hand in hand with import duties. A minimum price system is very costly to implement and invites abuse. Ultimately, it turns trade policy into a playground for lobbyists and a source of revenue for foreign suppliers."