The job cuts planned by Volkswagen highlight the issue posed by Chinese exports. The EU response has not yet come, and Germany warns that it does not want to destroy its industry for the sake of the environmental policy of the community bloc.
Volkswagen’s plan to cut up to 100,000 jobs and close four factories in Germany is exactly the type of industrial crisis that Brussels says it wants to avoid. However, EU countries and legislators are still arguing about how to react, writes Politico.
By the end of this year, European leaders want to finalize work on a historic law project, the Industrial Accelerator Act (IAA), which would channel billions of euros from public procurement spending to European companies to help them withstand an onslaught of cheap exports from China.
"The latest news from Germany shows the need to act decisively to protect our markets from the unfair practices of our global competitors," said EU industry chief Stéphane Séjourné, quoted by the publication, calling the IAA a "decisive" instrument.
Pros and Cons Arguments
The main provision of the bill - a preference clause for products manufactured in Europe - would favor locally produced goods. Its supporters argue that it is time for the EU to defend its industry, but others consider it a protectionist measure.
Critics argue that the proposal risks creating a legal maze for companies and will lead to higher prices for products made in the EU, while also risking excluding friendly trading partners such as Canada, the UK, or Japan.
"The situation at Volkswagen is alarming, but it is not an isolated case. It is the consequence of years of European naivety, while our global competitors have pursued clear and aggressive industrial strategies," said French liberal MEP Christophe Grudler, one of the three rapporteurs responsible for this dossier in the European Parliament.
Negotiations involving EU member states and legislators are just beginning, after the European Commission presented its proposal in March, with a three-month delay. Officials acknowledge, in private discussions, that time is already limited to reach a compromise by the end of the year, according to the EU roadmap entitled "One Europe, One Market".
What is the Trusted Partners List?
The most challenging task ahead is reaching consensus on the countries that should be included on a "trusted partners" list, whose products will be treated equally with European ones in certain areas of public procurement and financing. Here, broadly speaking, the camp of skeptics of free trade - led by France - faces off against export-oriented economies, led by Germany, the Netherlands, and the Nordic states.
"If we had the 'Made in Europe' label and a strong IAA-type tool, we could have cushioned the blow for Volkswagen and its employees," said Pierre Jouvet, the lead socialist MEP handling this dossier.
Jouvet advocates for a shortlist of trusted partners, carefully selected through an "opt-in" mechanism (based on voluntary participation). The proposal has met strong opposition from the powerful trade department of the European Commission, where chief negotiator Maroš Šefčovič coordinates efforts to expand - not restrict - the EU's trade relationships.
Séjourné's initiative on industrial policy stems from the belief that the EU's historical commitment to free trade is failing, and Brussels is struggling to find a coherent response to the existential threat posed by a Chinese bilateral trade surplus amounting to 1 billion euros per day.
Additional measures under development include requiring companies to diversify critical input sources outside of China, as well as possible investigations into plug-in hybrid vehicles, chemicals, and Chinese machine tools.
However, even the new trade weapons may prove useless if governments are not willing to use them. The EU's anti-coercion tool - the bloc's commercial "bazooka" - already allows the European Union to craft a broad response to economic coercion. However, it has never been triggered.
Will the System Work?
It is not clear whether the Industrial Accelerator Act, despite its extensive ambitions, will have a decisive impact when it finally comes into force.
Companies have generally welcomed the idea of "Made in Europe," but they believe its potential application is too limited to prevent the removal of entire supply chains from the continent.
The IAA rules could even turn against auto manufacturers like Volkswagen, according to the Bruegel think tank. For instance, "protecting the upstream aluminum sector from import competition would increase production costs for European car manufacturers, who rely on low-carbon aluminum at competitive prices to remain globally competitive in the electric vehicle sector," the group warns.
Thus, first and foremost, a compromise must be reached among the three EU institutions - Parliament, Council, and Commission, although signs of meeting the end-of-year deadline are not promising. With three committees examining the IAA, no fewer than 150 MEPs will be able to express their views on the 100-page bill.
Meanwhile, in the first half of the year, the Cypriot Council Presidency managed to come up with a compromise text only for certain parts of the 100-page bill - kicking off the debate on the controversial "Made in Europe" provision for the Irish presidency, which begins on Wednesday.
However, Irish Minister for Enterprise, Trade, and Employment Peter Burke is ready for the challenge: "It's a very aggressive roadmap, there's no doubt about that, but in Ireland, we are very good at finding compromises," he told Politico.
Germany Revs Up Its Nervous Engines
For now, Germany is not sitting still, considering the effects on its industry, especially the automotive sector. Berlin is dissatisfied not only from the perspective of China's economic competition but also from that of European environmental policy.
President of the European People's Party, Manfred Weber, told Euronews that EU climate policies must be "business-friendly." The European Union cannot "kill its industry because of climate change," he emphasized.
Weber heads the European People's Party, the largest political force in Europe, which in recent years has withdrawn some parts of the European Green Deal - the package of policies designed to achieve net zero greenhouse gas emissions across the entire community bloc by 2050 - in an effort to prioritize industrial competitiveness.
T.D.