EU frets as China builds an industrial base in Morocco

{"text":[[{"start":9.85,"text":"In the scrubby hills outside the Moroccan port city of Tangier the latest manifestation of China’s automotive manufacturing might is rising rapidly on a 500-hectare site carved out of farmland."}],[{"start":23.65,"text":"Sheep still graze right up to the high walls of the Mohammed VI Tanger Tech City, home to an emerging cluster of Chinese makers of auto parts from brakes to battery components hoping to help power Europe’s electric vehicle revolution."}],[{"start":37.599999999999994,"text":"But alarm is growing in Brussels that the billions of dollars Chinese companies plan to invest in Morocco could turn the north African nation into a launch pad for heavily subsidised goods that threaten to swamp European industry."}],[{"start":51.55,"text":"EU trade commissioner Maroš Šefčovič said the investment in Morocco was a symptom of Chinese efforts to deal with industrial overcapacity at home through the “transshipment” of exports via other trade partners to Europe."}],[{"start":65.89999999999999,"text":"“It’s becoming a big, big issue for the European economy,” Šefčovič told the FT. "}],[{"start":null,"text":"

• Sentury factory buildings under construction, with cranes and unfinished structures at Tanger Tech City industrial park.
• A large unfinished apartment building stands at the edge of a dirt road, with more new residential buildings and cars visible in the background, replacing former agricultural fields.

"}],[{"start":72.24999999999999,"text":"Amid rising trade tensions, Brussels is already stepping up its trade defences against both China and such alleged trade surrogates. Last year the European Commission ruled that aluminium wheels being shipped from Morocco were being “unfairly subsidised” by Rabat and by Beijing through its Belt and Road Initiative infrastructure investment programme."}],[{"start":93.94999999999999,"text":"EU officials said it could be difficult to distinguish genuine Chinese industrial collaboration with Morocco from attempts to circumvent EU import tariffs."}],[{"start":103.85,"text":"The EU has imposed tariffs of up to 45 per cent on Chinese electric vehicles. The OECD calculates that China subsidises industry at between three and eight times the rate of its member countries, often using soft loans that are hard to detect and take action against."}],[{"start":119.05,"text":"However, Chinese businesses attending a conference for investors last week in Casablanca, Morocco’s largest city, argued that the country was a key node in European auto supply chains. Both Renault and Stellantis, the owner of Peugeot, have major factories in the country, complicating any trade defence measures. "}],[{"start":138,"text":"Junjie Cai, project director at Chinese brakes manufacturer APG, which will open a $70mn facility in the Tanger Tech zone this year, said the plant would combine local labour and materials with Chinese supplies and technology. "}],[{"start":153.15,"text":"“European, Moroccan and Chinese companies can all share the benefits of this collaboration. This also [delivers] supplies near to their factories in Europe that are priced competitively,” he said."}],[{"start":163.95000000000002,"text":"The European Automobile Manufacturers’ Association, the EU industry lobby, declined to comment on the potential challenges posed by Morocco."}],[{"start":null,"text":""}],[{"start":173.50000000000003,"text":"APG’s factory will join nearly a dozen Chinese businesses in the Tanger Tech zone. A Sentury Tire factory is already operational and BTR New Material Group, the world’s largest supplier of battery anodes, has a plant under construction."}],[{"start":190.15000000000003,"text":"Chinese investments in other parts of Morocco include a $1.3bn gigafactory by Chinese battery maker Gotion High-tech — itself 25 per cent owned by German carmaker Volkswagen — that is being built in Kenitra, 200km down the Atlantic coast from Tangier."}],[{"start":207.90000000000003,"text":"Mehdi Laraki, chair of the Morocco-China Business Council, said delegations of potential Chinese investors had been arriving at a rate of two to three per week since the Covid-19 pandemic."}],[{"start":219.80000000000004,"text":"Morocco’s pitch to overseas investors includes a five-year holiday from business taxes, a young workforce, green energy inputs to help reduce EU carbon tax liabilities and access to 2.5bn consumers via some 50 national free trade agreements including with the EU and US."}],[{"start":238.55000000000004,"text":"Those tariff-free trade deals are a central attraction for Chinese businesses, according to consultancy Fitch Solutions, which noted in a report this year that “nearshoring of production” was seen as a way to mitigate tariff risk."}],[{"start":251.95000000000005,"text":"Morocco’s trade minister Ryad Mezzour, said last December that the country expected to have a “complete value chain” capable of serving up to 500,000 electric vehicles a year by the end of 2026."}],[{"start":null,"text":"

• Audience members seated in rows at the Dentons' Morocco-China investments summit, some holding up phones to photograph a projected presentation.
• Four men sit around a table eating lunch; two are looking at their phones, and one wears a red safety vest.

"}],[{"start":265.25000000000006,"text":"Moroccan officials reject suggestions that their special economic zones will become a backdoor to the EU for China’s excess production and so deepen the deindustrialisation crisis in manufacturing powerhouses such as Germany."}],[{"start":278.00000000000006,"text":"“We know that the EU is discussing industrial policy, but we think that Morocco can be one of the best partners in this. It will be a win-win situation,” said Yassine Elahyani, head of emerging industries at the Moroccan Investment and Export Development Agency."}],[{"start":295.95000000000005,"text":"Elahyani reminded Chinese investors at the Casablanca conference, which was organised by law firm Dentons, to observe so-called “rules of origin” that require goods to be sufficiently transformed in Morocco in order to be exported tariff-free to the EU."}],[{"start":311.55000000000007,"text":"Still, analysts warn that the sheer size of planned Chinese investment in Morocco, with some $6bn announced since the pandemic according to data from Rhodium Group consultancy, will challenge European policymakers. "}],[{"start":null,"text":""}],[{"start":325.45000000000005,"text":"Ahmed Aboudouh of the Chatham House think-tank’s north Africa programme said rising instability in the Middle East had increased the attractiveness of southern Mediterranean countries to Chinese investors."}],[{"start":336.75000000000006,"text":"“China has the capacity to dominate the whole vertical supply chain — from the processing of phosphate used in battery manufacturing, of which Morocco has huge reserves, to the battery factories and the roads and railways to the ports themselves,” Aboudouh said. “This is what concerns the EU, and it should.”"}],[{"start":355.30000000000007,"text":"Rabat can hardly ignore Brussels’ concerns. The EU is Morocco’s largest trade partner with one-third of its exports, worth more than €26bn in 2025 going to the bloc. More than half of this was from the machinery and transport sectors. "}],[{"start":371.50000000000006,"text":"Bob Savic, head of international trade at the Global Policy Institute in London, said the aluminium wheels case illustrated China’s strategy of using Morocco as a bridge to the EU for mid-value industrial goods such as metals and automotive components."}],[{"start":387.95000000000005,"text":"“Chinese inputs are shipped to north Africa, undergo limited processing, and are then exported to the EU under preferential trade agreements,” he said, adding that the increasing European tariffs on Chinese goods incentivised such rerouting. "}],[{"start":402.40000000000003,"text":"“This dynamic could turn north Africa into a more contested economic space, where EU efforts at ‘de-risking’ [from China] intersect with Chinese strategies to offshore industrial capacity,” Savic said."}],[{"start":null,"text":""}],[{"start":415.25000000000006,"text":"A key test will be whether the EU classifies Morocco as “European” under the Commission’s recently proposed Industrial Accelerator Act, which is designed to protect the bloc’s rapidly eroding industrial base. If passed, it would restrict some public procurement to cars and other products that are made with European content."}],[{"start":435.70000000000005,"text":"The European Association of Automotive Suppliers (Clepa) said it was already lobbying for a crackdown on subsidies and tariff circumvention by trade partners. Non-EU countries should only be included under the IAA if they did not use distortive subsidies and had the same regulatory standards, it said. "}],[{"start":453.85,"text":"While debate in Brussels continues, construction continues apace at Tanger Tech. In contrast to some other parts of Africa, the Chinese footprint is light around the site thanks to Morocco’s strict requirements on the use of local labour. "}],[{"start":468.3,"text":"The only sign of China’s arrival outside the Tanger Tech perimeter is a clutch of restaurants in the nearby village, its simple concrete houses and dusty streets dwarfed by the zone’s gleaming white factory buildings."}],[{"start":481.85,"text":"At the Roi des Nouilles — or “King of Noodles” — Chinese workers were slurping steaming bowls of food between shifts. Young waiter Soussi Abd Chafi joined other locals in welcoming the investment. “The [Chinese] boss is good — I’m still learning to cook Chinese food — and the park brings jobs to Morocco,” he said."}],[{"start":502,"text":"Back at the Casablanca conference, Leo Luo, north Africa project director at industrial park developer Holley Global, said Chinese investors were focused on what they could deliver for European consumers. "}],[{"start":514.4,"text":"“Some people have some advantages, some have others. We should work together. It’s a global market,” Luo said. “China makes good products now at the right price, I don’t understand why anyone is complaining.”"}],[{"start":528.1999999999999,"text":"Data visualisation by Alan Smith and cartography by Chira Llarena"}],[{"start":540.1499999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1780208742_1540.mp3"}