The European Union updated its industrial strategy on Wednesday (May 5), hoping to strengthen the single market’s resilience and reduce dependence on Chinese and other foreign suppliers in six strategic areas, including raw materials, semiconductors and batteries.
In a statement, the EU said the updated strategy is designed to ensure that the EU’s industrial development vision takes full account of the new situation following the New Crown epidemic and helps drive the transition to a “more sustainable, digital, resilient and globally competitive economy.
The EU said the new crown epidemic has made the EU aware of strategic technological and industrial dependencies. The EU relies on Chinese supplies for about half of its 137 strategically sensitive products, followed by Vietnam and Brazil. These products are mainly related to energy-intensive industries (e.g. raw materials) and health ecosystems (e.g. active pharmaceutical ingredients), but also to other products related to supporting green and digital transformation.
The EC has conducted an in-depth review of a total of six strategic areas, such as raw materials, batteries, and semiconductors, to provide insight into the origins of strategic dependencies and their impacts. The EC will also launch a second phase of an in-depth review of potential dependencies in key areas.
In areas of strategic importance, the Commission is identifying policy measures that can support industry’s efforts to address strategic dependencies and develop the necessary strategic capabilities,” the EU said. These measures are generally based on a series of actions, targeted and proportionate to the needs of the ecosystem and the identified risks.”
The EU said it will work to diversify international supply chains and seek international partnerships to enhance preparedness.
The EU will also support member states in pooling public resources through “projects of common European interest and importance” (IPCEIs) in areas where the market itself cannot provide breakthrough innovation, with possible support from the EU budget. “IPCEIs allow EU governments to inject funds under less stringent state aid rules, and companies can cooperate throughout the project.
Valdis Dombrovskis, vice president of the European Commission, said, “Resilient global supply chains are essential in times of crisis, as they help absorb shocks and accelerate recovery.”
He added: “We will work with like-minded partners wherever possible to support open, fair and rules-based trade; reduce strategic dependencies; and develop future standards and regulations: all of which are essential to our economic strength. At the same time, we stand ready to take autonomous action at any time to protect ourselves from unfair practices and to protect the integrity of the single market.”
Thierry Breton, EU Commissioner for the Internal Market, said, “A real industrial revolution is beginning – provided we make the right investments in key technologies and set the right framework conditions. Europe is setting itself up for an innovative, clean and resilient industry that delivers high quality jobs and allows SMEs to thrive even as the recovery proceeds.”
The EU’s relationship with China has fallen off a cliff since last December, when international concern grew over Chinese human rights abuses in Xinjiang and Hong Kong. The EU announced action against Chinese officials, triggering retaliatory Chinese sanctions against European diplomats, the European Parliament and think tank staff.
The European Commission’s EU-China investment agreement with China has also stalled. European parliamentarians have recently stated publicly that business relations with China will not be considered at the expense of human rights.
Thorsten Benner, director of the Institute for Global Public Policy in Berlin, said that continuing to increase commercial cooperation with China would send the wrong signal and prove that human rights and international law are not important to the EU.
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