The European Union’s attempt to breathe new life into stalled negotiations between Serbia and Kosovo has collapsed after the Serbian president and Kosovo prime minister failed to meet as planned.

The meeting, which was due to take place almost a year after the two leaders last met, came after repeated failed negotiations.

Both Serbian President Aleksandar Vucic and Kosovo Prime Minister Albin Kurti met separately with EU representatives, but according to EU chief diplomat Josep Borrell, there was no progress in implementing the agreement and no trilateral meeting.

Talks between Serbia and Kosovo aimed at reaching a major agreement that would pave the way for the normalisation of relations broke down last year.

During a summit in North Macedonia in March, Vucic refused to sign the EU- and US-backed Ohrid Agreement, citing pain in his right hand that would “probably last for years”.

Diplomats continued to call for its implementation, but the unsigned agreement was not implemented by either side.

Borrell said the EU “will continue to put all its efforts and capacities behind the normalisation of relations between Kosovo and Serbia”.

Borrell said those efforts would continue next week when he hosts the two negotiators in Brussels.

Vucic blamed Kurti for the lack of talks, saying his Kosovar counterpart “did not dare to meet”.

Kurti countered that he had set conditions for talks with Vucic, including the surrender of Milan Radoicic, the former vice-president of Kosovo’s leading Serb party, who confessed to leading a commando team that ambushed a Kosovo police patrol in September last year.

As last year’s talks collapsed, riots broke out in Serb-majority areas of northern Kosovo.

Tensions escalated further after Pristina made the euro the only legal currency in its territory in February, effectively banning the use of the Serbian dinar.

This put pressure on Serbia’s ability to continue funding a parallel health, education and social security system for Kosovo Serbs.

Kurti defended the move as a means of stemming the flow of large sums of money from Serbia into Kosovo and bringing organised crime groups to heel.

The European Union (EU) may seek security and defence partnerships with Japan and South Korea, paving the way for wider joint development projects in the defence industry, Nikkei Asia reported.

“We hope to develop partnerships with Japan and South Korea to work more closely together,” a senior European Commission official told Nikkei, adding that the security environment in Europe and Asia has changed dramatically.

Brussels is aiming for a ministerial-level agreement with Japan by the end of the year.

Brussels also has security and defence partnerships with non-EU countries such as Norway. Establishing a similar partnership with an Asian country would be a first.

Japan and the EU share common challenges such as relatively small national defence industries, high R&D and production costs, and dependence on US contractors.

There is also a proposal to increase opportunities for Japanese companies to participate in EU-led defence R&D programmes. The EU could provide funding for projects between Japanese and European companies.

Working with European companies could provide Japan with opportunities to develop defence technology, reduce costs and expand hardware sales channels.

For the EU, the partnership would provide a basis for defence industrial cooperation with Japan, offer opportunities for joint equipment development and increase supply options.

Meanwhile, South Korea is also increasing its arms exports to Europe. Poland has placed large orders for South Korean K2 tanks and K9 howitzers. Romania, Finland and Estonia are also increasing their purchases of South Korean weapons.

The EU will also consider cooperation in areas such as space, cybersecurity, disinformation and maritime security. The Japan partnership plan also includes cooperation on nuclear disarmament and non-proliferation, an important issue in the election campaign of Japanese Prime Minister Fumio Kishida.

In the wake of Russia’s intervention in Ukraine, the EU published its first defence industrial strategy in March, under which member states will work together to develop and increase arms production. Recognising the EU’s limitations on its own, the bloc is seeking to deepen ties with Japan, South Korea and other Western allies in the region.

In an interview with Nikkei in June, European Commission President Ursula von der Leyen said that security was one of the areas in which she wanted to improve Japan-EU relations. At a summit in July, the two sides agreed to launch a ministerial-level strategic dialogue on security.

In Brussels, Belgium, EU officials announced new taxes on Chinese electric vehicles (EVs) and shared the findings of an ongoing investigation into “state subsidies”.

Dozens of EU officials spent 250 working days in China, visiting more than 100 companies and gathering thousands of pages of evidence.

“The whole supply chain is subsidised,” a senior official at the meeting was quoted as saying by the SCMP, reporting on the findings of the investigation, which many predict could spark a trade war.

The official pointed out that this meant that the Chinese government was subsidising all players, and that this chain extended from the refining of lithium used in batteries, to the production of cells and batteries, to the production of BEVs [battery electric vehicles], and even the transport of BEVs to EU markets.

Automotive manufacturer pledges to ship hybrid cars to Europe

According to the SCMP reporter, “Chinese business representatives were shocked by the presentation. After a quick check of the figures, an executive from an electric car company promised to start shipping hybrid cars to Europe instead, as they would not be subject to such high taxes.

“The EU has ignored facts and WTO rules, disregarded China’s repeated strong opposition and acted unilaterally, disregarding the objections and warnings of many EU member governments and industries,” China’s Ministry of Commerce said in a statement minutes after receiving the notification.

Separate tariffs for three Chinese companies

Following the announcement in September by Ursula von der Leyen, President of the European Commission, that an investigation into Chinese electric cars would be launched, work began immediately and the sample size was reduced from 21 Chinese groups exporting electric vehicles to Europe to three.

These were BYD, soon to become the world’s biggest seller of electric vehicles; Geely, which spent the 2000s acquiring major European brands such as Volvo; and SAIC Motor, owner of the iconic MG and Volkswagen’s joint venture partner.

The final tax on most Chinese electric vehicle exports to Europe will be a weighted average calculated on the basis of the subsidies on the books of these three companies. This is likely to mean an additional tax of around 21 per cent on average.

When experts realised that the giant SAIC was on the list, they predicted that the countervailing duties could far exceed the EU’s average rate of 19 per cent.

Details of the EU investigation: Thousands of questionnaires sent out

As part of the investigation, the companies were sent questionnaires of more than 60 pages and 18,000 words each. They asked for access to financial information and forensic-level details of the assistance each received from the Chinese state.

According to the SCMP, the document said: “It is in your own interest to answer as accurately and completely as possible and to provide supporting documentation. You may supplement your answer with additional data”, but in reality it was a veiled threat to “comply or you will be excluded from the European market”.

According to Rhodium Group research, only SAIC chose not to comply and on Wednesday found itself facing the highest import tax on all EU electric vehicle shipments and the third highest tax ever imposed by the EU.

This tax is on top of the existing 10 per cent rate, meaning the cars will cost almost 50 per cent more.

Other companies, including BYD and Geely, will be taxed at a lower rate than standard EU models, with a weighted average of 21 per cent.

BYD could benefit from new taxes

“SAIC is very dependent on the European market and has no plans to localise production yet, so it will be very affected,” said Ilaria Mazzocco, an expert on China’s electric vehicle trade at the Centre for Strategic and International Studies.

BYD, on the other hand, appears to be in a good position with an EU factory, low tariffs and a geographically diversified market.

The EU also sent a series of questionnaires to the Chinese government, asking it to forward them to selected lithium suppliers and local banks. Beijing refused.

“The Chinese government has been very active in seeking justification for various steps. There has been a lot of interaction, but less positive activity on their side in terms of providing us with the information we requested,” the senior EU official said.

Instead, according to the EU, Beijing has tried to obstruct the investigation with a series of threats that have multiplied as the Brussels probe has drawn to a close.

EU not afraid of WTO

Brussels is confident it has a “watertight” justification for the tariffs and is not worried about a WTO challenge that would point to the fact that some Chinese companies pay lower taxes than their European competitors.

Judging by the EU’s findings, the inspectors found subsidies everywhere they looked. Lithium processors and battery makers are told by the state to sell to electric vehicle companies at below-market prices, while car companies are exempt from battery excise taxes.

The companies issue green bonds, which state financial institutions are required to buy, and are given preferential land, income tax breaks and cheap refinancing options mandated by the People’s Bank of China.

Chinese companies’ market share in the EU rises to 25 per cent

The EU believes its own companies are suffering as a result. Between January 2020 and September 2023, Chinese companies increased their market share in the EU from 4 per cent to 25 per cent, while the share of their local competitors fell from 69 per cent to almost 60 per cent, officials said.

The inspectors added that Chinese subsidies are “jeopardising” Europe’s green transition by depressing the price at which European companies can sell electric vehicles, meaning that in some cases they are making a loss on every vehicle sold.

BYD’s growth plans unaffected

Chinese electric vehicle maker BYD, led by billionaire Wang Chuanfu, can withstand the EU’s additional tariffs on electric vehicles from China and take market share from harder-hit rivals, analysts say, according to Forbes.

Shares in the Chinese carmaker jumped 8.8 per cent in Hong Kong and up to 6 per cent in Shenzhen on Thursday as the tax hike was significantly lower than the 30 per cent previously expected.

The EU said BYD would have to pay an additional 17.4 per cent tax on top of the current 10 per cent from next month.

Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities International, said: “The market believes that the impact on BYD will not be as severe as previously feared. Compared with other Chinese automakers, BYD may have an advantage in the region at the moment,” said Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities International.

SAIC calls for ‘decision review’

Ng says BYD could take market share from SAIC as tariff hikes could reduce the appeal of the MG brand in Europe.

Thanks to its competitive pricing, MG counts Western Europe as its biggest market, where it was the fifth-largest EV brand by deliveries last year, according to market research firm Canalys.

The MG4, for example, has a starting price of 28,990 euros, compared with around 33,000 euros for its main rival, Volkswagen’s ID.3.

In a public statement, SAIC called on the EU to reconsider its decision, which it said would have a major negative impact on economic cooperation between China and the region.

Strong reaction from German car industry

On the other hand, the new tariffs imposed by Brussels have led to a split between Germany on the one hand and France on the other.

Berlin worked behind the scenes to stop the tariff increases, while Paris backed Leyen. One senior official said the Germans even used the term “so-called overcapacity” in the meetings as a sign of how much they were aligned with Beijing.

Wolfgang Niedermark, a board member of the Federation of German Industries, said: “The focus now should be on minimising the negative impact on international supply chains and European companies. European companies have no interest in an escalation of the trade conflict with China,” Niedermark said.

The VDA, which represents carmakers such as Volkswagen, BMW and Daimler, strongly criticised the decision, with president Hildegard Müller warning that it was “another step away from global cooperation”.

European carmakers producing electric vehicles in China will also be affected. The largest group is Dacia and BMW, which will face an import duty of 21%.

This is even higher than Chinese carmaker BYD, which will see a lower tariff of 17.4% for participating in the Commission’s investigation and providing evidence that it benefits from less state support.

ACEA, the European Automobile Manufacturers Association, whose members have more diverse interests, said it had merely “noted” the decision.

German government pushes for negotiations

“The European Commission’s punitive tariffs are hitting German companies and their best products,” said German Transport Minister Volker Wissing (FDP) in X.

“Vehicles must become cheaper, not through trade wars and market fragmentation, but through more competition, open markets and significantly better business conditions in the EU,” Wissing wrote.

Similar comments were made by Economy Minister Robert Habeck (Greens), who told German media that “tariffs are always a political measure of last resort and often the worst option”.

“It is very important that talks take place now,” Habeck said, calling for negotiations between the EU and China.

German firms fear retaliation

German companies are also concerned about possible Chinese retaliation, with Volker Treier of the German Chambers of Industry and Commerce (DIHK) warning that “the tariffs announced by the Commission on Chinese e-cars will not be without consequences for the export-oriented German economy”.

Fears were fuelled by the response of the Chinese Ministry of Commerce, which said it was ready to “take all necessary measures” to protect the interests of its manufacturers.

“It is also up to China to come to Europe with constructive proposals to prevent an escalation of trade conflicts and to stop anti-competitive behaviour consistently and quickly,” said VDA’s Müller, calling on the EU and China to resolve the issue through negotiations.

Müller said they needed China to solve global problems, including climate change, and argued that a trade war would jeopardise this transformation.

Objections from the Czech Republic and Malta

Like the German manufacturers, the Czech Association of the Automotive Industry has announced that it believes such measures could have a negative impact.

“On the contrary, it was the removal of trade barriers that led to an increase in international trade and prosperity in recent years, especially in the automotive sector, which relies on strong exports,” said Zdeněk Petzl, the association’s executive director.

Petzl warned that China could aggravate already tense trade relations by retaliating against Europe and the US, stressing that European car companies import more than 90 per cent of key materials for electric vehicles and batteries from China.

“The introduction of new tariff measures will certainly be felt by Chinese manufacturers and may slow their growth, but we do not expect it to affect China’s subsidy policy,” Petzl said, advocating a systemic approach to strengthen European industry, increase competitiveness and open new markets.

Malta’s energy minister, Miriam Dalli, told The Post last month: “We don’t want tariffs that don’t help us achieve our decarbonisation goals. Having more expensive products will not help us achieve our ambitious targets,” she told The Post last month.