China and Europe agree to cut Chinese hybrid vehicle exports by half

The European Union has reached a significant accord with China to reduce its exports of hybrid cars to the bloc by over half within the next four years, aiming to shield European car manufacturers from potential job losses. The EU Trade Commissioner, Maroš Šefčovič, announced the historic deal during a press conference in Beijing on Friday.

The agreement marks the first of its kind and was reached after "intense" negotiations over the past six months to curb a €1.18bn trade deficit between the two economic powers. Šefčovič highlighted that the deal would lead to a substantial reduction in hybrid car exports, potentially cutting several million vehicles over the course of the next four years.

The EU expressed concern over China's aggressive sales of hybrid vehicles, which could lead to the demise of certain sectors within the European car industry, resulting in thousands of job losses. The Chinese government's decision to accept the EU's request for a moderation in hybrid car exports without resorting to prior trade tension investigations is seen as a notable shift in their typical trade practices.

The EU leaders emphasized the urgency of addressing the situation, with Šefčovič stating that they expect swift action from the European Commission. He emphasized that while this agreement is a crucial first step, it is merely the beginning of a longer process.

The deal includes additional provisions such as continued negotiations on cars, export restrictions on rare earths, and increased access for EU food and drink products into China. China agreed to adhere to procedures concerning company price undertakings for hybrid cars, potentially setting higher minimum price tags for Chinese cars sold in Europe.

The EU will brief its diplomats ahead of a leaders' summit, and both sides reaffirmed their commitment to handling differences within the framework of WTO rules, aiming to stabilize and balance bilateral trade and economic relations.