Europe fights with US and China subsidies to save its industries

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The energy crisis and rising cost of living threaten a resurgence of protectionism. Moves by China and the US are pushing the EU towards adopting a maximum plan of subsidies for European industries to prevent companies from fleeing the Old Continent. Her trade deficit between the EU and China, which in 2021 he reached nearly €250 billion (about €700 million per day), takes sleep away from “Made in Europe.” Brussels is also engaged in a subsidy war with the US that risks devastating effects on European industry. Therefore, there is a need to respond with an aid program specifically for companies producing in the EU.

Biden’s bazooka

In mid-August, the Joe Biden administration passed inflation-reducing legislation that included a “bazooka” of $369 billion (about €355 billion) in subsidies to U.S. industry to support a “green” transformation of manufacturing. have started. The move includes tax credits for electric vehicles manufactured in North America, easing the US battery supply chain. The requirement to receive the subsidy excludes his EU companies, many of which may succumb to the temptation to move production to the US.According to the French industry lobby MedevEU companies’ transatlantic flights could be accelerated by US energy tariffs, which are currently significantly lower than in Europe.

Why China could leave Europe without gas next summer

Brussels response

Europe could respond to Biden’s anti-inflation bill by appealing to the World Trade Organization (WTO) by launching a legal dispute over subsidies that European industry defined as “discriminatory.” increase. But the judicial road is not only long and full of unexpected events, it is also impractical to avoid the short-term consequences of US measures. The idea of ​​responding to subsidies with other subsidies by launching the European Sovereignty Fund, announced in Ursula von der Leyen’s State of the Union address, as a tool to ensure that According to the description of Thierry Bretonthe fund should help “invest heavily” not only in the transformation of Europe’s energy mix, but also in digital capabilities, common defense and other strategic sectors.

The announcement has not yet been reflected in legislative proposals from the Commission. But there are signs that we are heading in this direction. For example, the European Commission’s Economic Commissioner Paolo Gentiloni said yesterday that EU officials were “working” on “new common European instruments to support competitiveness and limit the risks of fragmentation”. Announced.

save the single market

In addition to the flight of EU companies, the danger is precisely that of an entirely intra-European uncoordinated reaction with a country with purchasing power like Germany. €200 billion Berlin to deal with the energy crisis It is a scenario that has already been embodied in the plan. There is therefore an urgency for Brussels to step in to save the entire European industry, even at the expense of some free market principles.

Source: Today

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