Current Developments
In recent years, the EU has become increasingly assertive in defending its economic interests against perceived unfair trade practices. The adoption of the EU's Foreign Subsidies Regulation in 2022 allows the European Commission to investigate and address distortions caused by foreign subsidies in the EU market. This regulation is directly relevant to the EV dispute, as it provides a legal framework for scrutinizing Chinese subsidies. Looking ahead, the EU is expected to continue to use trade defense instruments to protect its industries, while also seeking to engage with China on issues of mutual concern, such as climate change and global health. The outcome of the EV negotiations will likely set a precedent for future trade relations between the two blocs.
Practice MCQs
Question 1
Consider the following statements regarding the EU's Foreign Subsidies Regulation:
1. It allows the European Commission to investigate distortions caused by foreign subsidies within the EU market.
2. The regulation primarily targets subsidies provided by countries with which the EU has free trade agreements.
3. It empowers the EU to impose countervailing duties on subsidized products.
Which of the statements given above is/are correct?
- 1 and 2 only
- 1 and 3 only
- 2 and 3 only
- 1, 2 and 3
Explanation: Statements 1 and 3 are correct. The Foreign Subsidies Regulation allows the EU to investigate and counteract distortions caused by foreign subsidies. Statement 2 is incorrect because the regulation applies to all foreign subsidies, not just those from countries with free trade agreements with the EU.
Question 2
Which of the following best describes the concept of 'countervailing duties' in international trade?
- Tariffs imposed on imports to protect domestic industries from competition.
- Taxes levied on exports to discourage domestic consumption.
- Duties imposed on imports to offset the effects of subsidies provided by the exporting country.
- Quotas placed on imports to limit the quantity of goods entering a country.
Explanation: Countervailing duties are imposed to neutralize the effects of subsidies provided by exporting countries, ensuring fair competition in international trade.
Question 3
Assertion (A): The European Union is increasingly scrutinizing subsidies provided to Chinese electric vehicle (EV) manufacturers.
Reason (R): The EU is concerned that these subsidies may distort competition and harm European EV producers.
In the context of the above statements, which of the following is correct?
- Both A and R are true, and R is the correct explanation of A.
- Both A and R are true, but R is NOT the correct explanation of A.
- A is true, but R is false.
- A is false, but R is true.
Explanation: Both the assertion and the reason are true, and the reason correctly explains why the EU is scrutinizing Chinese EV subsidies.
Previous Year Questions
PYQ 1 - UPSC Prelims 2024 2024
Which of the following statements best describes the core issue in the electric vehicle (EV) import dispute between China and the European Union (EU)?
- (a) Disagreements over environmental standards for EV production.
- (b) Concerns regarding intellectual property rights related to EV technology.
- (c) The EU's allegations of unfair subsidies provided to Chinese EV manufacturers.
- (d) Disputes over the volume of EV imports from China to the EU.
Explanation: The core issue revolves around the EU's concerns that Chinese EV manufacturers are receiving unfair subsidies, giving them a competitive advantage in the European market.
PYQ 2 - UPSC Mains 2024 2024
Analyze the potential implications of a trade war between China and the European Union (EU) stemming from the electric vehicle (EV) import dispute. What measures can be taken to prevent such a scenario and foster a more cooperative trade relationship?
PYQ 3 - SSC CGL 2024 2024
Which organization is currently in negotiations with China regarding electric vehicle import disputes?
- (a) United Nations
- (b) World Bank
- (c) European Union
- (d) International Monetary Fund
Explanation: The European Union (EU) is engaged in negotiations with China to resolve the electric vehicle import dispute.
PYQ 4 - SSC CHSL 2024 2024
The primary aim of the negotiations between China and the EU regarding electric vehicle imports is to:
- (a) Increase the volume of EV imports from China.
- (b) Establish a common currency for trade.
- (c) Prevent a potential trade war.
- (d) Promote technological collaboration in EV manufacturing.
Explanation: The main goal is to prevent a trade war by addressing the concerns related to EV imports.
PYQ 5 - IBPS PO 2024 2024
Which of the following is a potential economic consequence of a trade war between China and the EU over electric vehicle imports?
- (a) Increased stability in global financial markets.
- (b) Reduced inflation in both China and the EU.
- (c) Disruption of supply chains and increased costs for consumers.
- (d) Enhanced cooperation in renewable energy technologies.
Explanation: A trade war typically leads to supply chain disruptions and higher costs for consumers due to tariffs and other trade barriers.
PYQ 6 - SBI PO 2024 2024
What is the primary concern of the EU regarding Chinese electric vehicle imports that has led to the current dispute?
- (a) The high quality of Chinese EVs.
- (b) The lack of innovation in Chinese EV technology.
- (c) Allegations of unfair subsidies provided to Chinese EV manufacturers.
- (d) The low volume of EV imports from China.
Explanation: The EU's main concern is the alleged unfair subsidies that give Chinese EV manufacturers a competitive edge.
PYQ 7 - CDS 2024 2024
Which of the following factors is NOT a likely driver of the electric vehicle import dispute between China and the EU?
- (a) Concerns over national security implications of foreign-made EVs.
- (b) Allegations of unfair subsidies to Chinese EV manufacturers.
- (c) Desire to protect domestic EV industries in the EU.
- (d) Geopolitical tensions between China and the EU.
Explanation: While national security concerns can play a role in trade disputes, they are not the primary driver in this specific EV import dispute. The main issues are subsidies and protecting domestic industries.
PYQ 8 - CDS 2024 2024
The agreement between China and the EU to negotiate the EV import dispute primarily aims to:
- (a) Immediately halt all EV imports from China.
- (b) Establish a military alliance between China and the EU.
- (c) Prevent a potential trade war.
- (d) Force China to adopt EU environmental standards.
Explanation: The primary goal of the negotiations is to prevent a trade war by finding a mutually acceptable resolution to the dispute.