Joining competition policy with trade and industrial policy: Let’s get specific

Press quote (CEPR)
07 November 2024

Sander Tordoir (CER) gave a strong summary of the major turnaround of the Chinese economy, the “second China shock” (overcapacity and low household consumption as the real estate bubble also burst), which created conditions for a massive manufacturing surplus (around 10% of China’s overall GDP; Setser 2024) being exported to the rest of the world. 

...As Sander Tordoir said, “if we do not pursue our own industrial strategy, we will import China’s imbalances, shrinking the EU’s manufacturing base, which is more productive than services, and innovation”.  

...Tordoir also mentioned the need for ‘shades of grey’: “the EU should shift away from a yes-or-no debate on industrial policy to a nuanced when-and-how discussion considering the characteristics of each industry, its prospects and its strategic value”. 

And “(it) should focus its subsidies on sectors where short-term assistance is needed to help infant European industries, such as hydrogen, achieve scale, or employment-rich sectors like cars, where we have a real shot at making the transition to electric vehicles (The EU is already a net exporter of EVs). It should also prioritise support to markets for goods, like wind turbines, in which a global oligopoly or duopoly is likely to arise, and in which a dependence on China would be risky. That way, the EU will help new businesses to grow while minimising handouts to those that do not need them”) (Springford and Tordoir 2023).