The world is facing a wave of protectionism fueled by an obsession with reducing risks

EU foreign policy and security chief Josep Borrell is clear: Europe’s approach to geopolitics based on “peace plus free trade plus human rights” is giving way to “confrontational” policies. The world is “entering an era”unfair competitionAccording to the High Representative’s statement in Strasbourg on 13 September, it is biased by state subsidies.

The focus is on China. The senior official claims that in six years the EU’s trade deficit with the Asian giant has increased from 140 billion to 400 billion euros. Bilateral relations need to be recalibrated. This will be one of the objectives of Borrell’s first visit to China in mid-October.

China under the spotlight

Ursula von der Leyen lashed out at China in her final State of the Union speech ahead of the European elections on June 6-9. The president of the European Commission has shamed the Asian giant for subsidies to its companies that have led to the strangulation and closure of European companies, especially in technological sectors related to green energy.

European Union Will not “separate” from the Chinese economybut it will reduce the risks posed by trade with the Asian giant. Brussels will launch an investigation into China’s illegal subsidies to the electric vehicle sector. “This is a crucial sector for the clean economy, with enormous potential for Europe, but world markets are now flooded with cheaper Chinese electric cars as their prices are kept artificially low due to large public subsidies that distort prices.” market,” von von der Leyen said. “From wind power to steel, from batteries to electric cars, our goal is clear: The future of the cleantech industry must be produced in Europe.”

But this is not entirely the fault of Beijing and its state capitalism. “Also in Europe: 80 percent of post-pandemic state aid was provided by Germany”said the High Representative.

He explains to this newspaper: “The EU’s protectionist measures are not new; they started during the Trump era because at that time the USA, the Union’s main ally, started to implement protectionism.” İlke Toygür, expert on European geopolitics and director of the Center for Global Economy and Policy Innovation at IE University. “This has changed a little under Biden, but not too much. The innovation is that this protectionism is supplemented by a discussion of how to reduce risks (“risk reduction”): it is no longer just a question of how to protect national industries from foreign industries, but also Initiation of plans to guarantee raw material supply and security of value chains. “This is protectionism with economic security.”

The Resilience 2030 document, in which Spain assumes the Council presidency this term, is a detailed example of two factors brought together. He proposes that the EU limit the entry of “unrelated countries” into strategic companies, as in the case of the yet-to-be-completed attempt to buy 9.9% of Telefónica by Saudi Arabia. But it also gives a long list of raw materials and materials that need to be diversified, from algal proteins to rare earth elements. The proposal in Spanish is an 80-page text prepared by more than 250 experts from 27 member countries and in collaboration with 80 ministries, the European Commission and the Council of the EU. It also calls for limiting foreign control of critical digital, energy and transportation infrastructure.

Warranty materials

For several years, European negotiators have been working like crazy to prevent a repeat of what happened during the pandemic (there was a lack of masks, or, as Borrell put it, “not a gram of paracetamol”); With traffic jams in Shanghai or the Suez Canal ports (in Spain no one could buy bicycles because they did not leave the ports via a spherical funnel). Later, with the war, sanctions began to be imposed on Russia and energy diversification was encouraged. Germany dependent on Russian gasThey began working to find other suppliers and reduce the risks of their energy mix.

During this time, the EU initiated agreements with Chile to guarantee lithium supplies. At the summit of EU and Latin American countries chaired by Spain, agreements were signed with Argentina, Uruguay and Chile on raw material and energy supply. More de-risking.

The Mercosur agreement with Brazil, Argentina, Paraguay and Uruguay was blocked. France insists on application Protective measures of farmers and farm owners compared to Brazilians who have fewer environmental or health constraints. More protectionism.

Risks of overprotection

None of this will be free. For every protectionist measure taken by one country, another follows in the opposite direction. For example, to Joe Biden’s IRA anti-inflation package providing $400 billion in subsidies to green tech companies, the EU responded by allowing member states to offer equivalent financial aid to prevent projects from going to the US. . Macron warned that this law was “shattering” the West. The EU responded to the US plan to invest around $60 billion to promote national chip production with another 43 billion euros and a European Chip Law.

“The problem for the EU is that this protectionism remains outside its borders. May have a negative impact on the common single market“The EU has always benefited from extensive global trade links,” warns İlke Toygür. “The EU’s greatest strength is not its armies, but its single market, regulatory power and connections with other countries. If we decide to enter the cycle of protectionism plus economic security, we must think very carefully.”

The expert warns that there is a trinity in China’s case: They want to cooperate, compete and control at the same time. However, if protectionist policies such as tariffs or sanctions on technology transfer are implemented, it will not be that easy to ensure cooperation on issues such as climate change. So the EU may protect its companies, but in the process it loses another public good, which is the fight against global warming.