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It has been two years since the European Commission published economic security strategy Long on abstract verbs (“promote, protect, partner”) and short on specific verbs. It was clearly time for an update. two weeks ago said communication duly arrived With a clear call for “an integrated, whole-of-government and business approach, better governance, as well as even closer cooperation with like-minded partners and, where appropriate, joint action”. This declaration of intent will no doubt send Xi Jinping on the phone to tell his ministers that he has upped his game.
Since the strategy was originally published in 2023, there has been difficulty dealing with China’s aggressive trade strategy compound growth From Donald Trump’s random rebuke. To its credit, the EU remains a relatively open economy, not succumbing to the kind of protectionist madness that has overtaken the US.
Yet where collective intervention is the case, or certainly where the EU itself says it is, it is difficult to show that the bloc’s response to issues such as economic pressure has met the substantive challenge – let alone the increased challenge.
Bashing the EU for its inability to act strategically is like shooting not only the fish in the barrel but also the dead fish floating on the surface of the water. But it is still fair to compare its achievements with its ambitions in building collective resilience against shocks, and the gap remains large.
The Communication correctly points out that the EU already has various tools to act strategically, such as the anti-coercion instrument, which gives it wide latitude to retaliate against threatening trading partners. It has not been used. The bloc continues to list critical minerals, but as we have seen given its vulnerability to Chinese blockages of rare earths, it has done little to turn them around.
Even without specific tools and interventions, this is the best way building resilience There will be a strong, innovative and integrated domestic economy. But the EU has not done enough to create a single market, leaving the services sector and especially capital markets fragmented.
Everyone’s favorite example, electric vehicles, makes this point clearly. The EU car industry, including German manufacturers, was extremely slow to act on EVs compared to China, focusing instead on lobbying for conventional cars (and cheating on emissions tests). The failure to innovate means policymakers have spent the past few years trying to make cheap EVs available to reduce carbon emissions, while giving the EU car industry time to use anti-subsidy import duties.
Others have suggested more invasive devices but these are likely to cause more harm than good. European Commission Vice President Stéphane Széjourn wants stronger intervention in the form of a “Buy Europe” requirement. It would stipulate that 70 percent of the content of critical goods, including cars, has to be made in the EU. It’s already been postponed until next year and I’m willing to bet One year lease on BYD Dolphin Nothing really comes close to this. The 70 percent figure is prohibitively high and would make EU products so expensive compared to Chinese products that they would require greater tariff protection.
Meanwhile, multinational companies are driving the debate forward. Volkswagen Group has started manufacturing cars in China, and is now seeking relief from anti-subsidy duties to export back to Europe.
This creates a dilemma for both Germany and the EU. Cities depend on car manufacturers suffering terrible painDoes the German government try to preserve domestic jobs or support national champions developing new technologies and creating jobs abroad? So far, one of its typically short-sighted solutions is to do both. German lobbying has persuaded the European Commission to propose allowing the manufacture of conventional combustion cars beyond the original phaseout deadline of 2035.
From a strategic perspective, it is quite clear that the bloc will not act collectively in support of Europe’s EV industry. VW is moving on its own. Other European manufacturers must now compete with the engineering tradition of an extremely powerful brand combined with highly advanced Chinese technological and production capacity.
Apart from “security”, the EU has done nothing in line with the “promotion” or “partnership” promised in 2023. Instead, two years of procrastination, procrastination and negligence have left the union divided and vulnerable to pressure from abroad.
alan. beattie@ft.com
