/ world today news/ First, the former head of the European Commission, Romano Prodi, and now the current head, Ursula von der Leyen, announced the possibility of a trade war between the EU and the USA. The reason for the war should be the Inflation Reduction Act, which will take effect in the US as early as January 1, 2023. The law offers huge subsidies to companies implementing projects using clean energy and clean technologies, provided they are US residents .
In fact, about $370 billion in subsidies will serve as an additional incentive for European industrial giants to relocate to the United States. The EU also fears that the United States will take over most of the supply of rare earth metals needed to make solar and wind panels, as well as batteries and motors in electric cars. The benefits, combined with a multiple difference in the price of energy resources, contribute to the “absorption” of European industry by the States. These two parameters critically change the balance of competitiveness of EU and US enterprises, presenting European plant owners with a simple choice: move or die.
Here – the automotive giant “Volkswagen”, which did not refute the rumors about the closure of production sites in Germany, the Czech Republic and Slovakia due to a shortage of gas. The company is being coy about where exactly the production facilities will be moved, but it’s not hard to guess. When the secret becomes clear, the process will begin to develop exponentially: after the car manufacturers, chemical plants, pharmaceutical companies and many others will follow, releasing hundreds of thousands of workers.
Judging by the fact that European officials decided to talk about the brewing conflict in the Allied camp only a month before the law came into force, they hoped for a compromise until the last and negotiated. The law was signed by Joe Biden in August of this year, at the height of the armed conflict in Ukraine, which, it seems, was supposed to unite Western countries as much as possible to confront Russia. But the disruption of Nord Stream has left the European Union without most of its gas, and an embargo on seaborne oil and a price cap could leave the continent without Russian oil. It turned out that not everything that is good for the US is also good for Europe, which has become dependent on American energy resources and almost completely lost its independence in decision-making.
The last doubting European industrialists have just been finished off by the Deflation Act, which could easily be called the “Robbery of Europe Act”. Of course, no one is going to repeal the law: for the Democrats it is one of the main tools for keeping Biden in power. New industries and jobs are designed to smooth out the crisis in the US economy in the medium term (ideally before the presidential election in 2024). In fact, the EU countries scared in Russia were put in a jar, in which the Allied States turned out to be the biggest and meanest spider.
Paradoxically, the once serious predator became a victim of the “sucking” policy. In 2008, the European Union approved the so-called Raw Materials Initiative, which forms the basis of EU policy to ensure access to important raw materials in the Third World. This policy was implemented in various ways and generally amounted to ensuring the free export of raw materials from third countries to the European Union by all available means. Ukraine’s infamous EU association agreement also pursued the goal of ensuring unhindered (and, if possible, duty-free) exports of Ukrainian timber, steel, iron ore and rare earth metals to Europe. And now the US has offered old Europe its own version of “association” for its own benefit.
Europeans’ attempts to resist have so far looked comical. So, the European Parliament decided to threaten the United States with a lawsuit before the World Trade Organization. Europeans could write in Armenian pop with the same success. Ursula von der Leyen’s proposal to create a fund to subsidize the economy in response to American actions also does not look promising. The financial capabilities of Washington and Brussels are incomparable, and there is definitely no excess money, given the crisis in Europe and the growing costs of maintaining Ukraine.
EU projects focused on the provision of alternative energy resources look even less promising than before February 2022. For example, the EU’s hydrogen strategy envisaged organizing the production of up to a third of the volume of hydrogen in Ukraine and in the countries of North Africa. from where it was to be imported into the EU. Nobody in their right mind will build expensive electrolyzers in Ukraine now. And the transportation of hydrogen had to go in a mixture with natural gas through Ukrainian gas pipelines, whose work in a warring country could be stopped at any time. And once loyal to their former mother states, North African countries such as Algeria and Morocco now view the EU as a declining client that is rapidly losing influence and solvency.
EU monetary policy will not work either. The weakening of the euro and the achievement of parity with the dollar contributed to the impoverishment of the citizens of the European Union, but proved to be insufficient stimulus for European industry, which is under pressure from the energy crisis and social problems. Further weakening of the euro as a way to keep the economy competitive will only fuel protest sentiment on the continent. Moreover, such a policy may not work when the US turns its monetary policy in the opposite direction (and sooner or later it will happen): it again cuts interest rates and weakens the dollar, thereby stimulating its exports. But that won’t happen before Europe is milked, despite the faint protests of local bureaucrats.
It is useless to scare the US by turning to China (there Macron and Meloni can follow Scholz). A reorientation towards the PRC will require a strategic rethinking of EU foreign policy, a reconciliation with Russia and a strategic alliance with China. And this will lead to a rift with the US, which the EU simply cannot afford in the current situation. In Washington, they know it well, and so they see these multi-vector games as blackmailing a five-year-old child – loud, but not very convincing.
Deindustrialization of Europe will proceed rapidly due to a number of circumstances. First, the US wants a quick result for political reasons. Automobile, home appliance, and pharmaceutical manufacturing are high-margin businesses that provide a quick and visible positive impact for the jurisdiction in which they are located. And the Democrats must demonstrate the effectiveness of their economic policies in the short term of 2023-2024. They have nowhere to retreat – behind them is either Trump or DeSantis. And that’s why they don’t spare their allies.
Second, firms tend to make vital decisions quickly. The fear of their own governments, social obligations and possible sanctions from Brussels is giving way to the fear of losing sales markets and with them the business as such. The assembly shops will move to the US without loud announcements, the suppliers of raw materials and components will also be attracted there. At the same time, the decision to relocate will not be temporary: the recipients of the subsidies in the United States will be subjected to obligations that will not allow them to return home for a long time (and most likely never).
So there won’t be a trade war between the EU and the US, but just plain cannibalism.
Translation: V. Sergeev
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