EU Industrial Strategy: bound to fail?
The EU is pursuing an increasingly activist industrial policy. Amid rising global competition, the aim is to create a level playing field for EU and non-EU firms and to strengthen European companies in the global market. Harry Flam, senior advisor at SIEPS, examines the flagship projects in the fields of semiconductors and batteries and finds it unlikely that they will succeed. (2022:1epa)
The EU is pursuing an increasingly activist industrial policy. The reasons are several: EU companies face state-subsidized competition from China; they are seen as too dependent on outside suppliers in many sectors, and the US and China are making huge public investments in strategic areas while EU firms lag behind.
The European Commission has updated its 2020 industrial policy strategy. The strategy now includes proposals to make the single market work better, but also ‘offensive’ aspects which seek to strengthen EU industry, such as new industrial alliances and so-called ‘important projects of common European interest’ (IPCEIs).
In this European policy analysis, Harry Flam, senior advisor at SIEPS, examines whether the EU’s industrial offensive is likely to succeed. The analysis focuses on two areas in particular: the semiconductor and battery industries.
The author doubts that these flagship EU projects will succeed. Other countries are well ahead of the EU in semiconductor manufacturing and are investing large sums. Catching up will be enormously costly for the EU, and the complexity of supply chains makes it doubtful whether self-sufficiency can be achieved in this area. As for battery production, market mechanisms have already proved strong enough to secure production capacity to meet demand. The EU’s investment therefore seems superfluous.
SIEPS has also published a longer version of this analysis in Swedish.