Thomas Fazi
In recent years, Western governments have increasingly engaged in self-conscious industrial policies to address a variety of problems — the green transition, resilience of supply chains and, perhaps most importantly, geopolitical competition with China. Initiatives such as the Biden administration’s CHIPS and Science Act and the Inflation Reduction Act (IRA) in the US are symbolic of this new wave of industrial policy.
In response to the IRA — which many European officials have worried could harm EU manufacturing — several officials and leaders have advocated for a robust European industrial policy featuring reciprocal subsidies and support mechanisms. They are emphasising the need for a “Made in Europe” strategy to counterbalance the potential economic impacts of the “America First” policies embedded in the IRA. Calls for a more unified European industrial response have naturally grown in tandem with President-elect Donald Trump’s threats of more aggressive American protectionism.
Hence why this week, Stéphane Séjourné, the EU’s new industry chief, called for a “Europe first” strategy for key business sectors. “It’s not at all about protectionism because Europe really has no interest in a global trade war,” he said. “We have a strategic and technological interest to develop our own industries, to create employment and to create growth”.
This may sound promising, but the reality is that the EU’s institutional framework makes it seriously unfit, both economically and politically, for confronting the new 21st-century geopolitical landscape. Economically, the single currency and the EU’s restrictive fiscal rules, combined with the lack of a true common fiscal capacity, represent a serious barrier to investment — at both the national and European level. This issue is further compounded by the EU’s structural and ideological bias against state intervention in the economy. This is exemplified by the EU’s stringent rules regarding state aid, which seriously inhibits industrial policy.
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