European Automotive Firm Preferences and Impact on Trade Policy: Using the European Union Tariffs on Chinese Electric Vehicles as a Case Study

Abstract

This research will supplement current literature on the fluid nature of the European automotive industry, as well as analyze changes in the trade preferences of European multinational automotive companies. Existing trade policy theory states that as multinational firms become more export-oriented and reliant on foreign sales, they should lean towards preferring free trade over protectionism–liberalization of trade policy should then occur as firms within each sector become more internationalized. I attempt to show why this is currently not the case in the European automotive industry, using the European Union (EU) tariffs on Chinese electric vehicle as an important case study–results indicate that although automotive firms have become more internationalized over time, their preferences are less reflective of strict liberalization or protectionism and more reflective of strategic demands for support from national governments in order to help increase their competitive trade position. Moreover, societal counter-mobilization and the diversification of interests between multinational firms and national governments can play an important role in this reversal of demands, further explaining why trade liberalization has not occurred despite increased firm reliance on globalization. The overall goal of my research is to study the international reliance and export dependency of the European auto industry, utilizing the recent EU tariffs on Chinese electric vehicles as a case study to contribute to existing literature on multinational firm preferences and trade liberalization in the EU. This study will take an in-depth look at the trade preferences of multinational firms, industry associations, and national governments in order to analyze how automotive corporations are responding to increased foreign trade competition. I find that most major European automotive producers stop short of supporting the tariffs on Chinese electric vehicles, instead remaining neutral or actively campaigning against protectionist trade barriers–this can often result in a clash of interests between automotive manufacturers and national governments, which then hinders movement towards overall trade liberalization.