July 20. 2024. 11:29

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Green industry: ‘Buy less Chinese’ instead of ‘buy European

Free trade advocates are relieved by the European Commission’s proposal for a “Net-Zero Industry Act” as compared to the draft, it does not favour European manufacturers over foreign ones, instead containing a looser provision against Chinese dependency.

As the production of heat pumps, solar panels, and batteries must be scaled up to fulfil climate policy objectives, the European Commission unveiled a plan to increase European manufacturing on Thursday (16 March).

One particular objective is to reduce Europe’s dependency on China, which currently dominates manufacturing of many clean tech products, such as solar PV cells.

For that, the European Commission proposes introducing additional criteria for public procurement or support schemes for green tech, allowing EU countries to favour non-Chinese products over Chinese ones, even if they cost more.

So far, options were limited, as EU state aid rules obliged EU countries to grant public support for renewable energy mainly for projects with the lowest price and allowed only non-discriminatory “non-price criteria”, such as environmental criteria, to make up a maximum of 30% of weighting when comparing bids.

The new proposal would see the 30% upper limit maintained but also adds a 15% minimum requirement for weighting “sustainability and resilience contributions”, which could include environmental standards, energy system integration, and risk management measures.

It also allows public authorities to consider the “proportion of the products originating from a single source of supply […], from which more than 65% of the supply for that specific net-zero technology within the Union originates”.

Experts say this would only affect products made in China or Turkey, as those are the only two countries that surpass the 65% threshold for some of the products covered by the law.

EU’s Net-Zero Industry Act aims to bring home clean tech production

The European Commission tabled its net-zero industry act on Thursday (16 March), setting a goal for the EU to domestically produce at least 40% of the technology it needs to achieve its climate and energy targets by 2030.

Relieved free traders as no “Buy European” clause is included

Compared to an earlier draft seen by EURACTIV, the clause is much weaker, which was welcomed by free trade advocates.

“This is a fortunate and reasonable development,” David Kleimann of think-tank Bruegel told EURACTIV, which he thinks was thanks to interventions from the Commission’s legal service and its trade department (DG Trade), to prevent the EU from breaching agreements struck under the World Trade Organisation (WTO).

The proposed law now explicitly refers to the WTO’s plurilateral Agreement on Government Procurement (GPA), which forbids signatory countries, including the European Union, to discriminate against each other in public procurement procedures.

Since neither China nor Turkey has signed this agreement, the EU “does not run the risk of violating its obligations under the WTO GPA” with the proposed clauses, Kleimann said.

Therefore, Kleimann, who had described the draft version of the law as “dangerous”, welcomes the inclusion of such provisions as a “reasonable policy”. “It is unwise to rely entirely on one supplier,” he said.

However, according to the draft law, governments can circumvent the rule if it leads to a price increase of 10% or more, which is considered “disproportionate”.

“This 10% threshold makes [the rule] even less likely to bite,” Kleimann said, noting that the EU has already introduced price surcharges on multiple Chinese products that vary between 10% and 80% to counter price dumping, which often still left Chinese products cost-competitive to those manufactured elsewhere.

“If you think about the margins that Chinese suppliers have, for instance, in the production of solar panels, that 10% is nothing,” Kleimann said.

This threshold would primarily affect support schemes for households, he added.

“Public procurement is somewhat different because here, companies will be able to adjust [the bid in a tender], whereas, for consumer and household goods, these prices are fixed,” he said.

Not so much of an economic union after all

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Parliament and EU countries to discuss the proposals

After the Commission’s proposal, the draft must be discussed in the European Parliament and the Council, which can still propose changes before it becomes law.

In the Parliament, the proposal was welcomed by the head of the Committee for International Trade, German MEP Bernd Lange (SPD/S&D).

In an interview with EURACTIV before publishing the proposals, Lange called the compatibility of the law with WTO rules a red line, arguing that the EU also wants other countries to follow WTO rules and thus needs to stay credible.

He believes this would also represent the majority’s view in the European Parliament, despite some, notably French, MEPs have called for “Buy European” clauses.

“This ‘Buy European Act’, this sometimes buzzes through the corridors here, indeed,” he said, “but I don’t think that this is the majority”.

The majority wants “fair trade”, Lange said.

Buy European Act: An effective response to the US Inflation Reduction Act?

The latest EU Council meeting saw the first steps taken towards a European Green Deal Industrial Plan, and discussions are underway on an as-yet-loosely-defined “Buy European Act”. However, not all are welcoming of this new form of green protectionism.