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9 trillion won direct investment over 3 years... EU trade chief "Suspicious transshipment for export, a big problem for Europe"
As Chinese companies are vying to build factories in Morocco, North Africa, concerns are growing in the European Union (EU) that they may be trying to use it as an export base to Europe, reported the British daily Financial Times (FT) on the 31st (local time).
China's large-scale Foreign Direct Investment (FDI) project announcements in Morocco for 2023-2025 amount to about $6 billion (approximately 9 trillion won), most of which involves new factory constructions.
In the port city of Tangier, a 5 million square meter agricultural area has been transformed into an automotive parts cluster, where more than 10 Chinese companies, including Century Tire Factory, BTR Battery Factory, and APG Brake Factory, are operating or building factories.
In Kenitra, located between Tangier and Casablanca, Chinese battery manufacturer Gotion is building a large facility worth $1.3 billion (approximately 1.96 trillion won).
Mehdi Laraki, President of the Moroccan-Chinese Chamber of Commerce, stated that 2-3 teams of Chinese investment delegations visit Morocco every week since the COVID-19 pandemic.
Morocco attracts foreign companies by offering a 5-year corporate tax exemption, a young workforce, green energy, and, most importantly, free trade agreements (FTAs) with approximately 50 countries, including the EU and the United States.
Ahmed Aboudou, head of the Chatham House North Africa Program, analyzed that instability in the Middle East region is also increasing North Africa's attractiveness among Chinese investors.
Chinese-backed investment projects in North Africa from 2023-2025 included 19 in Morocco, 9 in Egypt, and 6 in Algeria, which was significantly more than in the UAE (3), Saudi Arabia (2), or Qatar (1).
Consequently, in Europe, there is growing vigilance that Chinese companies' investments in Morocco could flood Europe with cheaply produced products, often subsidized by the state, thereby undermining European industries.
The EU is imposing tariffs of up to 45% on Chinese electric vehicles based on the results of an investigation into China's EV industry subsidies. If products meet origin rules and are deemed Moroccan, they can be exported to the EU tariff-free.
Maros Sefcovic, EU Executive Vice-President for Trade and Economic Security, told the FT that China might be attempting to 'transship' exports to Europe through trading partners to solve its domestic overproduction problem, expressing concern that "it is becoming a huge problem for Europe."
In fact, trade defenses against this are being strengthened. Last year, countervailing duties were imposed on aluminum wheels for vehicles imported from Morocco, arguing that they were produced not only in Morocco but also with unfair subsidies through China's Belt and Road Initiative.
However, it is pointed out that the EU's trade defense is not easy because European automakers such as Renault and Stellantis also have large factories in Morocco.
EU officials also said it is difficult to distinguish whether these are 'genuine' economic collaborations between China and Morocco or attempts to avoid EU tariffs.
The FT pointed out that a key test for the future will be whether the EU classifies Morocco as a country of origin equivalent to European products in its Industrial Acceleration Act (IAA), which aims to strengthen European manufacturing competitiveness.
This bill focuses on applying 'in-region manufacturing' requirements for public procurement and subsidy payments in strategic industries such as automobiles, steel, cement, and aluminum, as well as green industries like wind turbines. China is strongly protesting, claiming that it contains discriminatory regulations against foreign companies.
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