Chinese auto industry sets up in Morocco; EU fears it could become a gateway for subsidized goods

Central News Agency, Rabat, May 31. Chinese auto parts manufacturers are planning major investments and operations in Morocco, causing increasing alarm within the European Union. The EU fears that this North African country could become a gateway for Beijing to export its heavily subsidized goods, potentially causing severe damage to European industries. The Financial Times reported that EU Trade Commissioner Maros Sefcovic stated that the billions of dollars Chinese firms plan to invest in Morocco reflect Beijing's attempt to use third countries to 'transship' and offload its domestic industrial overcapacity into Europe. Sefcovic told the Financial Times, 'This is becoming a big problem for the European economy.' Amid rising trade tensions, the EU has begun strengthening measures to defend against China and so-called trade proxies. The European Commission ruled last year that aluminum wheels exported from Morocco benefited from 'unfair subsidies' from both the Moroccan and Chinese governments. EU officials admit that it is sometimes difficult to distinguish between genuine industrial cooperation and attempts to circumvent EU tariffs. The EU currently imposes tariffs of up to 45% on Chinese electric vehicles. The OECD estimates that China's industrial subsidies are 3 to 8 times higher than those of OECD members, often provided through preferential loans, making them difficult to detect and counter. At an investor conference held in Casablanca, Morocco's largest city, last week, attending Chinese firms argued that Morocco is a vital node in the European automotive supply chain. The Financial Times noted that the French Renault Group and Stellantis, which owns the Peugeot brand, also have large factories in Morocco, complicating any potential trade defense measures by the EU. Chinese brake system manufacturer Zhejiang Asia-Pacific Mechanical & Electronic (APG) will open a new $70 million plant in the Moroccan port city of Tangier this year; executives stated they will combine local labor and raw materials with components and technology from China. The report mentioned that nearly a dozen Chinese firms are already in the Tangier Tech City, with Sentury Tire's factory already operational, and BTR New Material Group, the world's largest supplier of battery anode materials, also building a new plant. Other Chinese investments in Morocco include a $1.3 billion mega-factory being built by battery maker Gotion High-tech in Kenitra. Morocco's advantages in attracting foreign investment include a five-year corporate tax exemption, an abundant and young workforce, green energy supplies to help reduce corporate EU carbon tax burdens, and free trade agreements with about 50 countries, including the EU and the US, providing access to a market of 2.5 billion consumers. The Financial Times pointed out that according to Fitch Solutions, these duty-free trade agreements are the biggest incentive for Chinese firms, with 'nearshoring' seen as a way to reduce tariff risks. Moroccan officials have denied claims that their economic zones will become a 'backdoor' for Chinese overcapacity to enter the EU, thereby exacerbating the deindustrialization crisis in manufacturing powers like Germany. However, it is difficult for Morocco to ignore the EU's concerns. The EU is Morocco's largest trading partner, with Morocco's exports to the EU exceeding 26 billion euros last year, accounting for one-third of its total exports, more than half of which are machinery and transport equipment.