EU must seek to de-risk rather than decouple from China, says von der Leyen

European Commission President Ursula von der Leyen said that competition with China had to be based on a level playing field. PHOTO: EPA-EFE

DAVOS, Switzerland - The European Union needs to work and trade with China on clean tech and push for a level playing field rather than seek to decouple from the world’s second-largest economy, European Commission president Ursula von der Leyen said on Tuesday.

Dr von der Leyen said in a speech at the World Economic Forum (WEF) annual meeting in Davos that China had made boosting clean tech innovation and manufacturing a key priority in its five-year plan, dominating in sectors such as electric vehicles and solar panels.

“But competition on net-zero must be based on a level playing field,” she said, adding that Beijing had been encouraging energy-intensive companies to relocate to China with promises of cheap energy, low labour costs and lenient regulation.

China, she said, heavily subsidises its industry and restricts access to its market for EU companies.

“We will still need to work and trade with China, especially when it comes to this transition. So we need to focus on de-risking rather than decoupling,” she added.

This meant using the EU’s trade and domestic defence tools, such as the recently implemented foreign subsidies regulation.

“We will not hesitate to open investigations if we consider that our procurement or other markets are being distorted by such subsidies,” she said.

Dr von der Leyen also said the EU will prepare a law to make life easier for its green industry, and back it up with state aid and a European Sovereignty Fund to keep firms from moving to the United States and China.

She said the moves would be part of the EU’s Green Deal industrial plan to make Europe the home of clean technology and industrial innovation on the road to net-zero carbon dioxide emissions by 2050.

“To help make this happen, we will put forward a new Net-Zero Industry Act,” she added.

“The aim will be to focus investment on strategic projects along the entire supply chain. We will especially look at how to simplify and fast-track permitting for new clean tech production sites.”

The EU is concerned that European companies will move to the United States, which has a US$369 billion (S$487.66 billion) scheme to subsidise green production. The EU will therefore provide money for its industry as well, Dr von der Leyen said.

“To keep European industry attractive, there is a need to be competitive with the offers and incentives that are currently available outside the EU,” she said.

“This is why we will propose to temporarily adapt our state aid rules to speed-up and simplify. Easier calculations. Simpler procedures. Accelerated approvals. For example, with simple tax-break models. And with targeted aid for production facilities in strategic clean tech value chains, to counter relocation risks from foreign subsidies,” she said.

But she noted that, because not all countries in the 27-nation EU have the same capacity to support their companies, using state aid alone could result in unfair competition – “fragmentation” that would damage the EU single market.

“To avoid a fragmenting effect on the single market and to support the clean tech transition across the whole Union, we must also step up EU funding. For the medium term, we will prepare a European Sovereignty Fund as part of the mid-term review of our budget later this year,” Dr von der Leyen said.

She did not give any details of the fund, an idea she first raised last September, and which does not yet have the support of all EU governments, notably Germany.

Dr von der Leyen also said on Tuesday that she backed listing Iran’s Revolutionary Guards (IRGC) as a terrorist organisation to respond to the “trampling” of “fundamental human rights” in the country.

Ties between the EU member states and Teheran have deteriorated in recent months as efforts to revive nuclear talks have stalled. Teheran has detained several European nationals and the bloc has become increasingly critical of a continuing violent crackdown on protesters, including executions.

“The reaction of Iran’s regime is atrocious and horrible, and they are trampling over fundamental human rights,” Dr von der Leyen told reporters.

The European Union is discussing a fourth round of sanctions against Tehran over the crackdown and Iran’s supply of weapons to Russia. Diplomatic sources have said members of the IRGC will be added to the sanctions list next week.

But some member states have called for the bloc to go further and classify the IIRGC as a terrorist organisation.


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