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EU between China and the USA: Protectionism will not save us

<p>sad vs kina</p>
sad vs kina / Image by: foto

Europeans are less hardworking, less ambitious, more regulated, and less risk-prone than Americans, and this gap is not being bridged but is widening. This was not stated by some passing American businessman traveling through regulated, social Europe, but by Nicolai Tangen, the head of the Nordic investment giant Norges Bank Investment Management, which manages 1.6 trillion dollars in revenue generated from Norwegian oil and gas resources. A few days ago, he loudly stated for the FT that American companies outperform European ones in innovation growth and technology development, resulting in stellar performances of American stocks. Therefore, it is not surprising that his fund invests almost half of its assets in American stocks (in 2013, their share was 32 percent), while reducing exposure to European ones. Twenty years ago, European investments held 60 percent of the total, but this was more than halved last year, to just 28.7 percent. The poor earning opportunities in Europe are illustrated by the fact that the fund even reduced its stake in the former flagship, Great Britain, from 15 to just five percent in its portfolio.

Airbus as an example

So unproductive, unambitious, without an appetite for breakthrough, caught in the firm grip of directives, guidelines, regulations, standards, criteria, measurements, and overall overregulation, the European Union is losing the last thread that ties it to the modern economic world. It has lost all positions in all key industries and sectors. Due to the late ignition of the electric drive, the automotive industry is dying. The Chips Act has not initiated competitive production of this essence of modern times (the Act has been in force for less than eight months, too little to awaken the famous Brussels ‘efficiency’). The production of solar panels and batteries is so expensive that it intends to deal with cheaper Chinese competition in the American way, through ‘fair’ investigations into Chinese dumping. Consequently, we do not have secured energy sources either (everything has already been said about the sense, speed, and actual reach of the Green Plan and transition; after all, the Chinese are more serious even in the green story). Again consequently, a number of energy-intensive sectors, such as glass, metal, chemicals, fertilizers, paper, and cement producers, have lost positions. The same applies to shipbuilding (South Korea and China have taken the lead). In times of war, we do not have a military industry, and in the age of AI, we are merely users, not innovators. Okay, we do not intend to focus on what we do not have but on what we (potentially) have, while identifying focal points of lost competitiveness. All interlocutors agree that Airbus is an excellent example of how the EU should operate in all other fields.

Far-reaching consequences

– The EU’s industrial policy initiated the development of Airbus, fostering competition and innovation in the global market for civil aircraft, which was long dominated by the American company Boeing, which itself was a significant beneficiary of industrial policy support. In the USA, the CHIPS and Science Act, the Inflation Reduction Act, and the Bipartisan Infrastructure Law have set important goals for national security and climate. Each of them utilizes subsidies, tax breaks, loan guarantees, and other standard tools of industrial policy to stimulate research, production, and employment in the private sector in key areas of the economy. However, due to decentralized fiscal structures and rules that limit state subsidies to industry, Europe is lagging behind China and the USA. Economic growth in the EU is slowing, and some Union economies are faring worse than others. Mega platforms, cloud computing, supercomputing, and the development of advanced artificial intelligence are largely absent from the European economic and technological environment. The consequences are far-reaching: these are high-growth sectors and important drivers of structural change and productivity increase. Although Europe’s commitment to leading the world in climate action and transitioning to clean energy could ultimately bring a competitive advantage, it currently acts as an economic barrier and will continue to do so in the medium term, primarily because high carbon-emitting industrial sectors dominate exports. The war in Ukraine has exacerbated this problem, not only by increasing energy costs but also by forcing the EU to quickly free itself from dependence on Russian fossil fuels, which is a very costly process – details Luka Brkić from Libertas University.

Intolerance towards success

That no one predicts a bright future for the EU is practically confirmed by domestic companies seeking their own growth outside the EU. David Tomašek, a member of the Management Board of Maravić Engineering and Construction, whose company has long collaborated with China, says that the problem of Europe’s lagging is multifaceted. More on this and other similar topics can be found in the physical or digital edition of the business weekly Lider.

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