Li Chao: EU's new industrial law, 'acceleration' or 'shackles'
The Industrial Accelerator Act, which was officially submitted for review by the European Union recently, includes mandatory technology transfer and foreign equity restrictions in four major areas: batteries, electric vehicles, photovoltaics, and key raw materials. In the field of public procurement, it clearly states that "EU manufacturing priority" constitutes an investment barrier and institutional discrimination, and has become a "precise exclusion plan" specifically targeting external competition, especially Chinese enterprises. For such an 'exclusion bill', Peter Leibniz, the president of the German Confederation of Industry (BDI), unabashedly referred to it as a 'bureaucratic monster from Brussels' at the Hanover Industrial Fair.
Throughout the entire bill, it reveals the EU's anxiety about being deeply mired in industrial difficulties. In the current geopolitical landscape, the EU is facing a trend of deindustrialization, including shrinking production, capital outflow, and capacity relocation. However, the EU's response has not been to put in real effort to enhance local competitiveness, but rather to go against the trend, intending to build a "small courtyard high wall" through restrictive measures and exclusive clauses, and use public power to provide protection for specific areas of production.
More noteworthy is that the bill is highly targeted. The bill stipulates that if a country's global production capacity in the above four areas exceeds 40%, it must meet strict conditions such as technology transfer and the proportion of local employees when investing in the EU. Looking at the world, the only country that meets this' threshold 'is China. This kind of "tailor-made" discriminatory clause directly violates the WTO's most favored nation treatment principle and can be regarded as a typical "rule breaker".
The EU is one of the main beneficiaries of globalization and has always been a supporter and practitioner of free trade. But in order to block external competition, cope with geopolitical disputes, and gain space and time for its own development, the EU has been willing to go against its consistent principles and positions. The deeper contradiction lies in the fact that Europe appears to be a "maintainer of global rules" and a "leader of future industries" on the surface, but finds it difficult to accept the supply chain pattern naturally formed by the market, especially the competition of industrial advantages with China. Therefore, administrative intervention is used as a means to formulate so-called new industrial regulations. Behind it, it not only reflects the EU's cognitive bias towards the competition and cooperation among major powers, but also highlights its inability to adapt to the changes in the global industrial landscape.
Looking at the EU's economic and trade policies towards China in recent years, we can see an unstable trajectory: often after high-level meetings release signals of cooperation, confrontational tools such as anti subsidy investigations are immediately launched; On the one hand, Chinese companies are welcome to set up factories in Europe to drive local employment and industrial chain support, while on the other hand, strict rules of origin are imposed to limit these investments. Despite the fact that China has been a stable and reliable partner in the European manufacturing supply chain for 50 years since the establishment of diplomatic relations, the EU is increasingly viewing China from the perspective of an "institutional rival" due to geopolitical and value factors. The "de risk" that it wants to promote in its economic and trade is essentially "de Sinicization".
While continuously strengthening its defense against China, the EU has a different mindset towards transatlantic relations. The EU has never truly reflected on the risks of relying on and being a vassal of the United States before, assuming that the alliance between Europe and the United States is unbreakable, and has been hit hard by reality.
In fact, the development of EU industries lacks a clear logic and is often entangled with geopolitical issues, characterized by self harm, double standards, and inconsistency between words and actions. After the conflict between Russia-Ukraine conflict, the EU strongly promoted the energy withdrawal from Russia, with the effect of "cutting off the energy channels". Currently, there are plans to restrict Chinese investment in areas such as new energy and electric vehicles, without realizing that Chinese companies have formed significant advantages in integrating related industrial chains. If EU policies are implemented, European companies may face the risk of supply chain disruptions and soaring production costs. Even more ironic is that the EU accuses China of "trade distortion" and "overcapacity" while attempting to protect local industries through administrative means, turning a blind eye to issues such as high energy costs and lagging digital development. This strategy of 'only blocking without loosening' is destined to be ineffective.
If the EU wants to truly achieve industrial revitalization, it must abandon protectionist thinking and return to the track of open cooperation. One is to recognize China's advantages in new energy and other fields, achieve complementary advantages through equal cooperation, and build a community of shared interests in promoting global agendas such as green transformation. The second is to reduce dependence on the United States, truly achieve strategic autonomy, and abandon the practice of following the United States in everything and viewing China with colored glasses. Thirdly, we need to address our own structural issues and break free from constraints such as high energy costs and complex regulatory policies, rather than blaming external competition, especially China, for the decline in industrial competitiveness.
Ultimately, protectionism can bring short-term political comfort, but it is difficult to fulfill long-term prosperity promises. If the EU does not change its course and completely transform its industrial development thinking, then this bill, labeled as "acceleration", may ultimately become a shackle that locks in its own development space. (The author is the Deputy Director of the European Institute of the China Institute of Modern International Relations)