24 November 2023

VSe which has long been considered a dirty word is dropped. The European Union (EU) is finally ripe to adopt an industrial policy. Once again, progress did not happen by itself. Without the American spur of the Inflation Reduction Act (IRA), a gigantic subsidy plan linked to the energy transition, the Twenty-Seven would still be expounding on the benefits of free and undistorted competition, which has been the one of the pillars of European construction since its creation.

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The bill for “an industry with zero emissions” of greenhouse gases, presented on Thursday March 16 by the European Commission, constitutes a real break with this intangible faith in the rules of the market. In order to improve competitiveness on the Old Continent and not be left behind by the United States and China in the race for subsidies, the EU agrees to equip itself in turn with an arsenal to attract and retain investments .

Even if Europe denies adopting planning on the model of “Made in China 2025” launched by Xi Jinping, the Twenty-Seven are ready to set themselves objectives supposed to stimulate projects. This includes being able to manufacture 40% of our green technology needs, with the aim of achieving carbon neutrality by 2050.

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The idea is to create a favorable environment for investments in eight identified areas, from solar panels to heat pumps and batteries. To accompany this movement, the plan provides for a section on the reduction of European dependence vis-à-vis foreign countries for the supply of critical raw materials.

The need to reinvent

The EU could not stand still in the face of China and the United States. The offensive of these two countries threatens to transform Europe into a gigantic consumption zone condemned to obtain supplies from outside in order to succeed in its energy transition. While this awakening is salutary, and comparable to community initiatives taken during the Covid crisis, since the beginning of the war in Ukraine and, more recently, in the semiconductor industry, the success of the initiative has not nothing obvious.

Relaxing state aid rules and simplifying administrative procedures undeniably makes it possible to restore the attractiveness of the European area. But an investment decision is also based on other criteria, such as the price of energy, three to five times higher in Europe than in the United States.

Then, if, in terms of public money put on the table, the Twenty-Seven have no reason to be ashamed of what the Biden plan proposes, the visibility offered by the American system of subsidies for an industrialist is without comparison .

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Without a common tax policy and budget, Europeans will always find it difficult to compete. Even if the objectives have been set at Community level, public support will be at national level, with the risk of scattering and capture of most of the aid by the richest countries. The Commission has indeed considered measures to correct side effects through mechanisms so that the poorest regions are not left by the wayside. But this risks blurring the readability of industrial policy and relativizing the simplification movement it calls for.

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On the verge of losing the ideological battle in favor of multilateralism and competition, Europe has no choice but to reinvent itself. But can she do it without changing her DNA?

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