Three Blocs

China, USA, EU

State interventionist and protectionist economic policy - as the future central EU strategy for confronting the escalating global competition between the major economic blocs - is becoming a topic of discussion among the German functional elite. The "National Industrial Strategy 2030" presented by German Economy Minister Peter Altmaier is taking this into account.[1] As was already stated in advance, Germany's industrial strategy is seen as an "answer to the challenges of the 21 century" - as an answer to the rapid technological development, which, for example, in the field of artificial intelligence (AI) will revolutionize the economic structures in the capitalist core countries. This is accompanied by a "new fierceness" in competition, threatening "more than merely individual German companies." Particularly China and the USA are named as the EU's most important adversaries in Altmaier's strategy paper. Since President Xi Jingping took office, China "overtly" pursues an "uncompromising interest-driven policy," whereas the USA, under Trump. can no longer be Europe's "natural partner," because it completely disregards "international norms." The "National Industrial Strategy 2030" is thus also an "answer to the Chinese and US economic policy agendas, to the "New Silk Road" promoted by Beijing with "billions of dollars", as well as to the Trump administration's "ambitious economic plans."[2]

"Airbus for Battery Cells"

According to commentators, the German industry must be "strengthened" and "protected" against its competitors by defining specific "key industries" to be particularly intensively state-subsidized and politically promoted.[3] Within the framework of a "large-scale industrial policy," the "national and European champions" of specific industrial sectors, which could prevail against the "dominant players of the world," should be provided state resources, according to Altmaier. Particularly AI and genetic engineering will become the leading industrial sectors, in the decades to come. The USA and China are already investing gigantic financial means to promote these "world dominating technologies of the future," and this could have "serious consequences" for "Europe's prosperity and security." To exemplify his plans, Altmaier spoke of state organized and financed consortia, e.g. battery cell production for electric cars - a setback for the German car manufacturers through negligence - from which these "national champions" could emerge. In this context, Altmaier spoke of the creation of an EU "Airbus for battery cells." This is aimed at modifying the German industrial structure, characterized by medium-size enterprises, to adapt to the "new fierceness of competition in the global economy" through targeted promotion of large corporations.

"To Regain Leadership"

The ultimate objective of the state-controlled industrial policy is "to secure or regain Germany's and the European Union's economic and technological leadership." Specifically, Altmaier seeks to increase the industry's share of Germany's gross value added (GVA) by 1.5 percent - to 25 percent. Thereby, Germany would further expand its already dominant industrial position. With the exception of Finland and the Czech Republic, there is no other national economy within the EU with a comparably high industrial share. Columnists note that in the meantime - following decades of a declining industrial production share in the GDA in many western countries - Germany's competitors have also realized that a "stable economy needs a stable industry."[4] This is why the US government under Obama launched "reindustrialization" efforts and under Trump has accelerated these efforts with the use of protectionist measures - particularly in relationship to China.

Race for Reindustrialization

Thus, a protectionist race for the reindustrialization of the crisis-ridden national economies of the USA and Europe is gaining momentum, provoked by the crisis-related deindustrialization in many core western countries. According to evaluations in the USA, the reorientation of Berlin's economic policies signify that export-oriented Germany may begin to abandon its free trade rhetoric, in favor of growing protectionism, in which, the EU could also "stumble," driven by a Berlin-Paris axis.[5] Therefore, the state-promoted and subsidized sectors should include, alongside electric cars, chemicals and 3D printing, also cars, machine engineering, medical devices, green technologies, aerospace and defense. Altmaier's "Industrial Strategy 2030" comes hard on the heels of proposals from the BDI, calling for a more defensive line against China and to allow companies to bulk up into European champions.[6]

Jumbo Mergers

This debate ultimately revolves around the EU Commission's misgivings about the merger of Germany's Siemens Corp. and France's Alstom's railroad technology branches, to create a counterbalance to their Chinese rivals. Brussels has expressed its reservations, because the German-French merger would also mean a predominant position within the EU's railroad technology sector, which could eventually form a monopoly. On the other hand, economists are saying that the EU's competition laws should be altered accordingly, so that "the international competition relationships" rather than pan-EU "market control" are the deciding factors.[7] "Companies that are capable of internationally competing must be allowed to develop" within the EU, even at the price of an inner European monopoly of German companies with French junior partners. US observers suppose that, due to the upcoming Brexit, German and French top politicians will seek to have the EU's competition law readjusted, to allow their largest enterprises a particularly strong position on the market. The undermining of the antitrust regulators is being proposed within the context of the strategy for creating "European champions." In Berlin, BASF, Thyssenkrupp, Daimler, Volkswagen, Siemens and Deutsche Bank are explicitly named as candidates for "European champion" status. US observers remain skeptical. Without the counterweight of Britain, France and Germany are likely to create "inefficient monopolies."[8]

Industrial Lobbyism with Tradition

For decades, Germany's automotive industry, in particular, has been able to count on state support. At the EU level, Berlin has repeatedly opposed strict CO² limits for automobiles - and has prevented an effective EU climate policy by persistently weakening environment protection objectives. Berlin intends to persist in shielding the German industry from any significant pressure for innovation to reduce greenhouse gas emissions.[9] Therefore, it plans to "meet" the demands of industrial associations for "protection" from rising energy prices. Above all "bulk consumers" in industry should be exempted from those CO² pollution laws expenses, which actually should have motivated them to reduce emissions. "For me, it is clear that we must continue this electricity price compensation," Altmaier declared - also at significantly higher costs than had been previously planned.

[1] Jan Dams, Nikolaus Doll, Anne Kunz: Auf der zwanghaften Suche nach deutschen Champions. welt.de 04.02.2019.

[2], [3], [4] Nikolaus Doll: Das ist Deutschlands Antwort auf China und die USA. welt.de 01.02.2019.

[5] Jakob Hanke: Germany's industrial plan signals Europe's protectionist lurch. politico.eu 03.02.2019.

[6] See also Der neue Systemkonflikt (II).

[7] Jan Dams, Nikolaus Doll, Anne Kunz: Auf der zwanghaften Suche nach deutschen Champions. welt.de 04.02.2019.

[8] Jakob Hanke: Germany's industrial plan signals Europe's protectionist lurch. politico.eu 03.02.2019.

[9] Altmaier will Industrie auch künftig von Klimaschutzkosten entlasten. de.reuters.com 22.01.2019.