Mistaking the Wood for the Trees: Five Ways the EU can Deliver a more Competitive Industrial Policy

13 February 2023

The recent launch of the European Commission’s Green Deal Industrial Strategy was supposed to set the “framework for the transformation of the EU’s industry for the net-zero age”. Unfortunately, it’s now viewed as a panicked reaction to the Biden administrations Inflation Reduction Act (IRA) in the United States.

While the American legislation will increase the attractiveness of the US as a “green” investment location – a move which is positive for global efforts to combat climate change – it will not automatically result in a flight of capital and employment across the Atlantic. Rather, there is a real possibility that the hurried implementation of Brussels’ current proposals may, unintentionally, undermine the European Single Market, increase friction between member states and ultimately weaken the Transatlantic economic relationship.

Politically, the Industrial Strategy proposals cannot be considered in isolation. They are closely linked to a whole array of interlinked proposals regarding Trade Policy, State Aid Rules, the Competitiveness Agenda and Education to name but a few. They also form part of a significantly wider debate about the future direction of the EU itself. In this context, increased protectionism, supporting national champions and more EU-level borrowing represents a more statist, more centralised vision of European integration. A vision which challenges the Single Market underpinnings which have formed the basis of Europe’s decades-long economic expansion.