The Atlantic Council has said that there are formidable obstacles to Europe’s new industrial plans.
The Washington DC-based think tank says that the bloc’s industrial sector, which makes up 80% of its exports, faces challenges after its loss of cheap energy imports and reliance on imported technology for its decarbonisation mission.
Despite the promise from EU president Ursula von der Leyen of a ‘Clean Industrial Deal’, the Atlantic Council says that there are a number of alarming trends across the continent.
It wrote: “The European Union’s share of the global industrial sector, measured by gross value added, decreased from 21% in 2000 to 14.5% in 2021, numbers similar to the United States’. Manufacturing still accounts for 15% of the bloc’s gross domestic product (GDP). But amid the impacts of Covid 19 and the 2022 energy crisis, the EU industrial sector has lost 850,000 jobs since 2019.”
It added: “Experts question the EU’s preparedness for increasingly strategic industrial activities, such as defense, clean energy technologies, and chips. Moreover, the bloc’s reliance on imported energy commodities and technologies leaves its industrial sector vulnerable to external shocks. This vulnerability was exposed during Russia’s full-scale invasion of Ukraine, as the Kremlin took advantage of the EU’s reliance on Russia for 43% of its natural gas imports.”
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There are, the Atlantic Council says, ways in which the ‘Clean Industrial Deal’ can help, saying that its priority should be to address vulnerabilities in the energy supply chain. This starts, it said, with diversifying the sourcing for critical raw materials needed for domestic clean energy production—many of which Europe is reliant on China for. Europe, apparently, cannot be self-sufficient when it comes to this area.
The continent also needs, the Atlantic Council writes, electrification to reduce energy consumption and costs.
There are other issues.
The Atlantic Council wrote: “As emphasised by former Italian Prime Minister Enrico Letta in his Much more than a market report issued this spring, the EU’s internal fragmentation also poses a threat to industrial efficiency. Harmonizing regulations across member states and finalizing the EU’s single market are crucial steps toward creating a more predictable business environment, fostering investment, and encouraging innovation. Coordinated public spending at the EU level, particularly on large-scale projects like cross-border energy infrastructure, is essential.”
Author Andre Covatariu said that there are a number of things that could go wrong, including pushing China to cut off access to EU-bound exports in order to thwart the clean manufacturing sector. Such a trade war, he posits, would be damaging to both sides.
