I was quite confused by this distinctly European approach until I had dinner with a Chinese actuary working in the auto warranty insurance industry.

Europe asks China to voluntarily limit exports (mostly autos) to the European Union.  Europe doesn’t want to get China angry with them about this issue.  However, China is sending massive numbers of EVs into Europe.  Europe is losing its auto business. I couldn’t figure out why the EU didn’t take an aggressive/confrontational position.

Then I was reminded.  Europe cannot force Beijing through a trade action (tariffs, ban, EU limit etc.) because Beijing might stop selling them EV carbon credits.  If the European automakers cannot purchase Chinese EV carbon credit certificates, the fines levied by Brussels against gasoline powered autos will destroy the EU auto business.

Think about this for a while, then read the EU media report:

EuroNews –  Brussels is pressing Beijing to accept quotas on Chinese exports as negotiations enter their final stretch, with the EU threatening trade measures unless tangible progress is made by next month.

Brussels and Beijing are fighting over quotas that would limit Chinese imports to the EU market, as the Europeans seek to rebalance their trade relationship with China, Euronews has learned.

Both started intense negotiations last June over EU and Chinese access to each other’s markets, with an October deadline set by the European Commission to reach “tanglible” results. However, China is pushing hard against the EU’s attempts to protect its market.

According to one person familiar with the matter, the Commission, which is negotiating on behalf of the 27 EU countries on trade issues, wants China to accept quotas on specific products. However, it is unclear how China would accept and respect such quotas.

According to media reports, so-called “voluntary export restrictions” have been pushed by the Commission for electric vehicles. But Beijing’s trade minister rejected them in a statement earlier this month.

If China accepted such a system of restrictions, it would mean that it voluntarily limits its exports to the EU on the basis of a deal negotiated with the Commission, sparing the EU from adopting defensive trade measures that might be seen as an aggressive move by China.

Technical negotiations are in their final stretch as the October deadline is approaching. (read more)

It’s a remarkable mess, no?

Europe wants Beijing to voluntarily limit the number of EVs that come into Europe from China, in order to save their auto sector from complete collapse.  However, Europe cannot force Beijing to limit the number of EVs that come into Europe from China, or Beijing might stop selling them carbon credit certificates that will result in fines to the EU automakers that will collapse the EU auto sector.

You would think that Europe would just get rid of the net-zero carbon regulations until they can stabilize their market and get back to a reasonable energy policy.   Alas, that would mean reversing decades of climate change legislation.  The preferred route is to ask Beijing to limit hurting them.

Again, think about this.

Madness.