March 4. 2024. 10:28

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The Brief — Buy European!

Europe is discussing green industrial policy – and once more, new subsidies and new EU debt are on the agenda. But EU countries already heavily subsidise wind parks, solar panels and electric cars with billions – so what is going wrong?

The answer: We are basing public support on the wrong conditions. Our own “Made in Europe” rule would be the most elegant solution.

The American subsidy package, the Inflation Reduction Act (IRA), has sent shock waves across the EU – at least rhetorically (truth be told, it’s mostly energy prices that should concern us).

But upon closer inspection, the IRA actually does not contain more money than what EU countries are also pumping into their economies to support renewable energy, hydrogen and electric vehicles.

The Brussels bubble seems puzzled.

But the reason is simple: The IRA is so effective – or dangerous, if you’re on the other side – because it conditions public money (in the form of subsidies or tax credits) on products being “Made in America”.

“Buy American”, this is sometimes called – with the official term being “local content rule”.

But our own “Buy European” rules, as French president Emmanuel Macron has called for, are still a no-go for many in the European Commission and most notably the German government.

The latter has been vocal in criticising the US rules for not being “WTO [World Trade Organisation] compliant”, something that many in the free-competition/free-trade-loving European Commission also find hard to ignore.

But someone will have to say it: So what? Sue us! Good luck finding a judge!

The WTO is stuck in a stalemate because the US is blocking the appointment of new judges, remember?

For years, Brussels has accused China, too, of not being WTO compliant with their price dumping for solar panels – only to stand by and watch the solar industry disappear from Europe anyway because it could not keep up with the Far East’s prices.

The EU state aid rules, intended to secure free competition, were too strict and too merciless on the principle to oblige member states to only support the cheapest wind and solar projects, regardless of whether they originate in the EU or a third country.

There are a few heavily restricted exceptions, such as the option to use 30% ‘qualitative criteria’ when comparing projects, which in practice changes little.

The exodus of the European solar and (more recently) wind industry was the price of the “cheaper, cheaper, cheaper” policy, which hides behind abbreviations like CEEAG and terms like “de minimis” so that no normal citizen understands them anymore.

Tens of thousands of “green industry jobs” were lost this way, which Brussels is now desperately trying to bring back.

Planned economy, of all things, should now fix it. The Commission wants to set minimum capacities for the European production of solar panels, wind turbines and batteries.

But worry not. “It’s not a five-year plan if it goes to 2030”, as my colleague Janos Allenbach-Amman smugly puts it.

Good luck determining how many solar factories will be needed in Europe when not even the International Energy Agency could ever rightly predict how much solar capacity will be built next year.

Luckily, there’s a much easier way.

If only Europe would “jump over its shadow” (as we say in German) – and take off the straitjacket of WTO rules, which have been a mere shadow of themselves anyway.

If only we would dare to introduce our own “local content rule”, a “Buy European” obligation, or at least allow EU countries to do so, instead of making the cheapest price the most important selection criterion.

In this way, all the billions that are already being spent on the energy transition could be used for our industrial policy objectives – without having to invent a new program every week. Elegant, isn’t it?

Personally, I think there is no shame in saying that when Europe puts billions in wind and solar power, into electric vehicles, heat pumps and hydrogen, a large proportion of the jobs should also be created here. It may cost a bit more, but it brings good salaries, tax revenue and acceptance for the energy transition.

But even those who believe in the superiority of global competition should at least realise that you “cannot be the only herbivore in a world of carnivores”, as Economy Commissioner Paolo Gentiloni put it last week at an event in Berlin.

In other words: There’s no such thing as a rules-based international trade order any more.

The whole world has understood what follows from that. Has Europe, too?

The Roundup

Italy’s energy utility Enel inaugurated its expanded 3Sun solar panel manufacturing facility in Sicily, making it the biggest factory in Europe, officials said.

The EU lawmakers leading on the AI Act have circulated revised compromise amendments on how AI systems that could pose significant risks should comply with the regulation’s requirement.

France’s higher excise taxes on tobacco products which were put into place more than two years ago resulted in an increase in cross-border shopping according to a tobacco industry-funded report.

The Qatargate scandal has damaged the reputation and credibility of Europe’s house of democracy as it is the only EU institution where members are elected by citizens, Swedish Member of European Parliament (MEP) Abir al-Sahlani told EURACTIV in an interview.

Trading with international partners at “whatever costs” no longer makes sense, French Trade Minister Olivier Becht said, urging that the EU must react to the US Inflation Reduction Act with an industrial plan.

Belgian police have arrested two suspects after gunmen interrupted a sale of second-hand luxury watches in an underground carpark near the Brussels headquarters of the European Union, prosecutors said Tuesday (7 February).

Don’t forget to check out our Transport Brief for a roundup of weekly news on mobility across Europe.

Look out for…

  • College of Commissioners.
  • Commission Vice-President Margaritis Schinas receives representatives of Cybersecurity Coalition.
  • EU Commissioner Elisa Ferreira travels to Poland for launch event of 2021-2027 Partnership Agreement and related operational Programmes, meets Minister of Development Funds and Regional Policy Grzegorza Puda.
  • Informal meeting of competitiveness ministers continues on Wednesday.