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Luuk van Middelaar on EU Green Deal Industrial Plan

Following developments in the US, the EU has now also opened the door for large-scale State aid to its own sustainable industries. A means to curb China’s power. However, this plan is driving the EU and the US apart.

The consequence of the American aid package introduced in the Inflation Reduction Act (IRA) is that European companies are also put at a relative disadvantage to their US competitors. And even more concerning is that European-based companies are considering crossing over to the other side of the Atlantic Ocean. European Commissioner for Competition Margrethe Vestager told the Financial Times last week that when combined with stable, cheap energy prices in the US, the IRA could have a ‘toxic’ effect on some European industries.

Aside all the protectionist comments, Luuk van Middelaar, historian, Professor of Foundations and Practice of the European Union and its Institutions, and NRC columnist, believes that this is mainly a time for pragmatism. He is a member of the Dutch Advisory Council on International Affairs and last year contributed to an advisory report for the government with the title 'Designing Smart Industrial Policy'. In October 2022, he was one of the founders of a think tank, the Brussels Institute for Geopolitics.

‘Ultimately, this is all about relations between China and the US,’ says Van Middelaar. ‘America has realised that China is serious about becoming a world leader in strategic economic sectors by 2025 – from high tech to the green sector. The US is now doing everything it can to prevent that.’ This has been the backbone of American trade policy in recent years. ‘The package introduced by Biden fits this pattern.’ 

In other words: no-one is really happy with the current situation and the aid plans, but the Union has to act somehow. For now, Brussels has given the individual Member States room to provide more State aid to green industries: the strict regulations will be partly suspended. The risk here is that not only will the EU and US be competing with each other, but also countries within the EU itself.

Read the full article in Dutch newspaper NRC

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