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Finbarr Bermingham

Major EU members offered qualified support for the bloc’s flagship industrial plans on Thursday in the first debate over a proposal that has deepened tensions with China.
Germany, France, Italy, Spain, the Netherlands and Poland all accepted the broad parameters of the Industrial Accelerator Act (IAA), which would put strict conditions on investments into the union from China and other countries, even as they quibbled over red tape, timescales and how open the plan should be to non-EU members.
Proposed in March, the act is the crystallisation of what some call a “reverse Deng”, after former Chinese paramount leader Deng Xiaoping, whose efforts to draw foreign manufacturing are often credited with kick-starting China’s economic miracle.
Decades later, the EU wants to force companies looking to invest in Europe, while they tap public subsidies, procurement markets and fast-track permitting, to meet stringent terms, many of which mirror those Beijing used for decades.
In sectors like electric vehicles and batteries, firms would be required to establish joint ventures with local partners; transfer technology and know-how to such partners; conduct research and development in Europe; and abide by strict local supply-chain laws.

At the bloc’s competitiveness council on Thursday, supportive member states warned that the emergency facing EU industry meant there was no time for dawdling.
“The IAA can’t enter into force in three years’ time because there won’t be anything left to protect by then,” said Adolfo Urso, Italy’s business minister, referring to the transition period prescribed by the proposal.
“If we do that, we should call it the industrial decelerator act … we’d have to change the title,” Urso added. “We will just be a museum for people to come and visit from other continents and nothing else.”
Capitals jostled over whether countries with which the EU has free-trade agreements should be given preferential access to the plan. The core of the argument could be boiled down to whether it should be “made in Europe” or “made with Europe”.
“Looking at our citizens, how can we explain that ‘made in Europe’ looks like this, if we tell them it means the EU and around 90 countries?” asked Sebastien Martin, the French minister delegate for industry, as he clutched a world map showing countries that have trade deals with the bloc.
“Why would a business set up production if they could go to Vietnam or somewhere else far, far away and get the same subsidies?” Martin continued. “Which European jobs would we be preserving?”
“Made in Europe should be coming to Europe, building in Europe. It shouldn’t mean that we’re opening to absolutely everybody.”
Others, including Poland and Sweden, said the plan should be adopted without alienating “trusted partners”.
With Beijing vowing strong retaliation, speculation has swirled over the position of Germany, China’s biggest trade and investment partner in Europe by a distance.
This week, before travelling to China, Economy Minister Katherina Reiche said German exports should not be sacrificed for Brussels’ de-risking plans, a sentiment suggesting fear of Chinese retaliation runs deep in Berlin.
That said, Frank Wetzel, state secretary at the German economic affairs ministry, said his country “supports” the plan and that it “explicitly welcomes the made-in-Europe approach”.


But Berlin was one of several capitals to insist that there should be no additional regulatory burden placed on EU companies, many of which complain that red tape is stifling efforts to compete with the United States and China.
Spain, which has become an investment hub for Chinese EV and battery firms, said it supported the IAA’s tenets to ensure that these created value and jobs locally.
“We need to make sure the European economy is open but at the same time that we have to make sure FDI ensures local industrial capacity, qualified jobs, transfer of technology and knowledge,” said Fernando Sampedro, Spanish state secretary for the EU.
On the eve of a rare debate of the EU’s 27 commissioners about China, during which the officials are expected to support the use of emergency tariffs and quotas, the bloc’s industry chief, Stephane Sejourne, sought to emphasise the severity of the challenge Europe was facing.
“I’m talking about China’s industrial domination, which is not an accident. It’s the outcome of decades of state subsidies and non-reciprocal market access,” the Frenchman said.
“Its share of a global manufacturing industry has grown from 6 per cent only in 2000 to 30 per cent nowadays, and in that same time period Europe’s share decreased from 21 per cent, which it was in 2000, to 14 per cent nowadays,” added Sejourne, who called the data a “very brutal reminder that Europe can’t allow itself to be excessively reliant on distant supply chains for our critical goods”.
While the IAA has torn a new rift in the EU-China relationship, it is but one of many tools and probes the bloc is using to try and counter what it sees as the ills emanating from the Chinese economy.
On Thursday, Brussels announced a one-two jab against Chinese business giants Temu and JD.com, as it continues to flex a more muscular economic policy.
Temu was fined 200 million euros (US$232 million) under the bloc’s Digital Services Act for failing to “diligently identify, analyse and assess the systemic risks of illegal products being offered on its platform”.
The commission launched an in-depth investigation under its foreign subsidies regulation, meanwhile, into e-commerce giant JD.com’s US$2.5 billion takeover of German retailer Ceconomy.
“A preliminary investigation indicates that JD.com may have received foreign subsidies distorting the EU internal market. These include preferential financing, tax incentives and grants provided by entities possibly attributable to the PRC,” a commission statement read, referring to China by the initials of its official name.


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China-EU relations

‘We’ll be a museum’: EU heavyweights back industrial accelerator as China shock fears grow

Adolfo Urso, Italy’s business minister, urges the EU to move quickly and pass the Industrial Accelerator Act. Photo: EPA

Volkswagen electric vehicles at the German company’s factory in Wolfsburg. Under the Industrial Accelerator Act, non-EU firms would be required to establish joint ventures with local partners in sectors like EV. Photo: dpa

European leaders get ready to ‘act now’ amid rising fears of ‘China shock 2.0’

European Commission President Ursula von der Leyen is among those in support of a stronger trade and industrial policy. Photo: EPA

Industry chief Stephane Sejourne will push for wider use of the foreign subsidies regulation. Photo: EPA

Germany has said that any commission move to counter “unfair competition” must ensure it does not impede German exports. Photo: Photothek via Getty Images

EU firms in China starting to feel less gloomy as Beijing offers stability: report

A paramilitary police officer crosses a street near Beijing’s central business district. Photo: Reuters

Daniel Gros on what China can learn from the euro as it works towards a global yuan

Illustration: Lau Ka-kuen

Major EU countries push for tougher China policy ahead of Brussels debate

France’s position is well-known, with President Emmanuel Macron on Friday calling for a European “Section 301 tool”. Photo: Reuters

The Netherlands – home to companies such as ASML – has been at the coalface of economic security issues with China and the US. Photo: ASML

China’s firms have a glaring weakness as they face a barrage of EU probes

 Illustration: Henry Wong

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China

Diplomacy

Highlighting urgency, bloc’s major members offer qualified support of legislative proposal that has deepened tensions with Beijing


Highlighting urgency, bloc’s major members offer qualified support of legislative proposal that has deepened tensions with Beijing.


‘We’ll be a museum’: EU heavyweights back industrial accelerator as China shock fears grow

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Highlighting urgency, bloc’s major members offer qualified support of legislative proposal that has deepened tensions with Beijing

Highlighting urgency, bloc’s major members offer qualified support of legislative proposal that has deepened tensions with Beijing