The European Commission has proposed to effectively bar Chinese companies from building factories to produce solar panels, electric vehicles (EVs) and other green technology in Europe, unless the venture is half owned by European Union (EU) entities.
The “Made in Europe” plan is an attempt to prevent China from hollowing out fledgling European industries involved in the climate transition over the coming decades, by adding new restrictions on inward investment which Brussels officials have tailored to target Beijing.
The commission proposal would prevent tax breaks or other subsidies schemes encouraging people in EU states to buy EVs from being spent on Chinese-made EVs.
The proposed reforms would also potentially lock out US and Canadian firms from certain public contracts in EU countries in strategic industries, if European companies are judged to be disadvantaged by rules in the US, Canada, or other trading partners showing preference to domestic companies.
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The draft law, the Industrial Accelerator Act, has been the subject of a significant tug-of-war inside the commission, the EU’s executive body that proposes legislation.
Earlier drafts viewed as overly “French” and too protectionist were revised, following concerns it went too far towards blocking the US, UK and other countries from parts of the European market.
EU industry commissioner Stéphane Séjourné, who has championed the new law, said he would not get into which of Europe’s trading partners would likely be cut off from procurement contracts.
“There’s no point in drawing up lists ... I want to tread very cautiously on this subject, trade wars are being discussed all over the world at the moment, I don’t want to add any aggravating elements to anything at this stage,” the French politician told a press conference in Brussels.
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The main thrust of the proposal is to protect vulnerable European businesses from being smothered by Chinese competitors. In the last decade China has put a big emphasis on dominating industries central to the climate transition, such as EVs and solar panels.
Senior commission officials have for years been sounding the alarm about how China was racing ahead and cornering large parts of those new markets.
More than 90 per cent of the solar panel modules used in the EU are imported from China. Officials in Brussels are keen to avoid becoming so heavily dependent in other areas.
The EU has levied import tariffs on Chinese-made EVs in recent years, to prevent the more affordable products flooding the market and putting the European EV car industry out of business.
The commission justified those tariffs on the basis Chinese EV makers had been given an unfair leg-up by the Chinese state, through subsidies and other intervention.
Policymakers have also been concerned with a trend they fear could lead to Europe becoming part of China’s industrial “assembly line”.
“We’ve seen quite a number of examples in some of our member states where they basically come to a piece of European land, they build their factory, they come with thousands of Chinese workers, and they run the factory on their own, with very little local added value,” one commission official said.
The Industrial Accelerator Act proposes to limit permitted foreign ownership of such ventures in the field of EVs, batteries, or solar power to 49 per cent, as well as require at least half of employees to be Europeans.
The restrictions are designed to only apply in cases where the inward investment is coming from a country that has a dominant share of that industry.
The commission’s draft law is the start of the EU policymaking process. The proposal will now be considered by national governments in the Council of the EU, and the European Parliament.
