Almost 10 years after Emmanuel Macron’s Sorbonne speech (see EUROPE 11870/1), the concept of ‘European sovereignty’ has gained ground, becoming the common thread running through many European initiatives.
Recent history proves the French President’s vision right. The Covid-19 pandemic highlighted the EU’s dependence on critical medicinal product. The Russian military invasion of Ukraine has jeopardised the supply of low-cost Russian fossil fuels and, combined with the - so far verbal - assaults by the Trump administration, starkly raises the question of the security of the continent hitherto guaranteed by Washington.
“I think that the conceptual shift has taken place and that we have taken many steps that would have been unthinkable a few years ago. (...) We won this ideological battle. But we’re not at the right pace and we’re not on the right scale”, noted the French President on Monday 9 February in an interview with several European media.
A change has indeed taken place, particularly in the way the hundreds of billions of euros that the EU is investing in defence to support the Ukrainian war effort are being channelled. When buying military equipment, Kyiv must give priority to its own industry, that of the Member States and then that of the EEA/EFTA countries. By way of derogation, the Ukrainians will be able to turn to third countries if the weapons and ammunition they are looking for are not available.
But the EU is not yet completely revamped. Some leaders from traditionally free-trading countries do not look favourably on the introduction of a European preference, seeing it as protectionism in disguise. If ‘buying European’ means protecting European companies and limiting trade outside the EU, I am “very sceptical”, warned Swedish Prime Minister Ulf Kristersson in the Financial Times on Wednesday.
However, if the objective is to prevent Europe from being the only herbivore in a carnivorous world, then European preference, which aims to use European public funding and public orders to favour production in Europe and create the jobs and technologies of tomorrow, seems obvious.
A senior diplomat sums up the issues perfectly. “Keeping costs down through imports is the main cause of our dependence”, he said, citing as examples the processing of rare earths and the manufacture of photovoltaic panels, both of which were relocated to China in the 1990s. He saw “two limits” to this price competitiveness outsourced outside the EU: Europeans are dependent on decisions taken elsewhere, and they are giving up on remaining an industrial power. It would therefore be advisable to find, by using the depth of the internal market, a virtuous economic circle that will enable the absorption of the costs associated with the investment needed to regain independence.
The President of the European Commission, Ursula von der Leyen, seems convinced. “European preference is a necessary instrument” that “can help create lead markets in strategic sectors and support the strengthening of European production capacities”, she wrote in her contribution to the European leaders’ brainstorming session on competitiveness (see EUROPE 13804/1), being held this Thursday at Alden Biesen Castle.
The question no longer seems to be ‘should there be a European preference’, but rather ‘how should it be used?’.
In his report, former Italian Prime Minister Mario Draghi advocates a European preference in public procurement in the defence and space sectors, to support innovative SMEs in the EU, particularly in the field of launcher technology.
For Mrs von der Leyen, recourse to European preference must be “based on sound economic analysis and aligned with our industrial priorities, while engaging constructively with trusted partners”.
The content of the proposed Industrial Accelerator Act will reveal the balance between those in favour of ‘Made in Europe’ and those in favour of ‘Made with Europe’ (see EUROPE 13786/16).
From the Commission’s headquarters, people are watching this debate attentively, without necessarily seeing in it the controversy between two camps easily described in the media. It is recognised that it is better to focus on the growth of European companies in the industrial sectors most exposed to Chinese competition, while maintaining a strategy of commercial diversification with partners with whom free trade agreements have been signed.
This is what the French authorities are stressing: it is not a question of the EU, the most economically open continent, turning in on itself and jeopardise value chains that work with trusted partners.
But who is challenging the ‘Buy American Act’ that has been in place in the United States for decades? “Elon Musk would not exist without American public funding”, noted this diplomat.
Mathieu Bion