Keep knowledgeable with free updates
Merely signal as much as the Chinese language commerce myFT Digest — delivered on to your inbox.
The author is a fellow on the Chinese language financial system on the Asia Society Coverage Institute
The EU’s determination to demand know-how transfers from Chinese companies in alternate for battery manufacturing subsidies is a daring thought with many detractors. Critics, each in Europe and overseas, warn of financial coercion, retaliation by Beijing and the dangers of deepening China’s market affect in Europe.
However these considerations miss the purpose. The coverage is neither capitulation nor gamble; it’s a calculated response to the realities of the worldwide aggressive panorama for electrical automobiles.
The EU’s necessities will align Chinese language and European pursuits in ways in which may redefine inexperienced ambitions. It’s a technique that the US, caught in its obsession with tariffs and decoupling, ought to emulate.
By tying subsidies to know-how transfers and native manufacturing necessities, Brussels ensures that Chinese language firms contribute to the EU’s industrial base reasonably than merely exporting batteries. This strategy mirrors different world commerce practices. The US Inflation Discount Act, for instance, ties clear power subsidies to home content material.
The EU’s coverage leverages the energy of China’s management in battery know-how and manufacturing. Chinese language trade insiders view it as a possibility to deepen integration into European markets. By transferring know-how and establishing native manufacturing, Chinese language battery firms can safe entry to vital assets in a area much less vulnerable to geopolitical tensions than the US.
Tariffs, in contrast, have carried out little to realize their supposed targets. They result in workarounds, provoke retaliation and disrupt provide chains with out addressing underlying industrial challenges. Europe is specializing in strategic inclusion reasonably than exclusion, fostering mutual advantages.
European EV makers want Chinese language batteries. Take a look at the issues confronted by Northvolt, Europe’s homegrown battery champion. Regardless of billions in funding and high-profile contracts, the Swedish firm has struggled to scale up, going through operational hurdles and price overruns. It has now filed for chapter. Chinese language firms, in contrast, dominate not simply battery manufacturing however all the ecosystem — cathodes, anodes, electrolytes and logistics. Europe will battle to copy these capabilities.
The EU’s tech switch coverage addresses this hole and can develop a resilient, domestically anchored Chinese language battery trade. It additionally minimises the rising pains that include ranging from scratch. And it’ll place Europe to navigate a fraught world commerce surroundings.
This technique also needs to keep away from inner EU divisions. Spain companions with Chinese language firms on EVs, whereas France leans in the direction of protectionism. The tech switch coverage aligns nationwide and collective pursuits, making a framework to share advantages equitably.
The US ought to take notice. Its reliance on tariffs and the rhetoric of decoupling is extra about posturing than progress. Proscribing imports from China within the hope that home industries will flourish has not delivered. As an alternative, tariffs disrupt provide chains, drive up client prices and spur Chinese language firms to adapt. Suppliers reroute exports by way of third international locations, increase into different markets and proceed innovating quicker than their western counterparts.
Relatively than shutting China out, the US ought to interact extra strategically. Decoupling dangers pushing China and Europe nearer collectively. Beijing is already courting Brussels as a counterweight to US protectionism. Insurance policies such because the EU’s tech switch necessities deepen these ties.
The US doesn’t must abandon its considerations about China nevertheless it ought to rethink its strategy. By adopting a model of the EU’s coverage and tying market entry to know-how transfers and native manufacturing, America may guarantee Chinese language firms contribute to its progress whereas mitigating overreliance on imports.
Shifting the narrative round commerce and industrial coverage is essential. Tariffs are politically expedient however economically flawed. A technique combining engagement with strategic safeguards is likely to be harder to elucidate to the general public however will probably be far simpler in apply.
Neither the US nor Europe can afford to fall behind within the inexperienced know-how race. The stakes are immense and the competitors is unrelenting. By embracing a practical framework, the west can place itself as an lively architect of the clean-energy future.
Pragmatism isn’t weak point. Offers sign severe intent to safe a spot within the inexperienced financial system and be sure that Beijing doesn’t have the ultimate phrase.
