European industrial policy and state aid – a competence mismatch?

Summary:

The European Union (EU) has been entrusted with rather weak powers as regards industrial policy. On top of this, its Member States are prevented from pursuing a national industrial policy with monetary elements as this may distort competition within the EU internal market. At the same time, European companies compete in the global market with state-supported companies from other economically strong regions of the world, including China, Japan and the US. The EU’s current successful internal market paradigm, with its state aid prohibition, could therefore become an obstacle internationally.

This analysis argues that the EU presently suffers from a competence mismatch – the absence of a coherent European industrial policy – which risks making European companies weak globally. The EU would benefit from an industrial policy which is adaptive to geopolitical changes in the world, such as the Chinese Belt and Road Initiative and the present US mercantilist approach to trade policy as well as Brexit. A more aggressive European industrial policy might be needed at times when the rule-based international trade system is not working. If there is no global level playing field, trade strategies have to adapt to new realities.