A case for EU strategic autonomy

Buying an electric vehicle is still a very costly venture. Even with the generous government scheme that covers part of the cost for consumers, an electric car could still be out of reach for most individuals. 

With EU countries, including Malta, setting 2035 as the target date for a ban on sales of combustion engine cars, more effort is required to bring down the price of electric vehicles. 

Unfortunately, European car makers are still heavily invested in the petrol engine and have been laggards in the electric car market. The vacuum is being filled by Chinese-made electric cars that are cheaper and of good quality. 

This unfolding scenario has prompted European Commission President Ursula von der Leyen to announce in her state of the union speech the start of an investigation into Chinese electric car subsidies. 

The argument behind this investigation is that the Chinese government’s subsidies enable the indigenous electric automotive industry to sell cars at undercut prices globally. 

The European Commission’s probe is intended to protect the European car industry from unfair overseas competition but it also risks a savage trade war with China. 

Although Germany’s car industry stands to benefit if cheaper Chinese models are kept at bay, a trade war will also boomerang against them since China is also an important market for them. 

The solution has to be more home-grown and one that not only protects manufacturers but ensures consumers get better deals on electric cars. The EU must ease its rigidity and allow State subsidies to finance innovation and production of electric cars in Europe. In this way, jobs on the continent will be protected and more importantly, the transition towards electrification in the transport sector will be faster. 

This approach needs to be adopted across several sectors that are of strategic importance to Europe’s green transition and its economic and social wellbeing. 

This may be anathema to the EU’s underlying belief in the free market and trade across borders. But there is a global geopolitical context that cannot be ignored. 

At a time when even Europe’s ally, the US, is looking after itself by subsidising high-tech manufacturing and scientific research amid fears that it is losing its technological edge to China, the EU cannot stand by idly. 

The massive US aid package signed by American President Joe Biden last year includes among others tax breaks for computer chip manufacturing plants. 

The underlying rationale behind America’s subsidy drive is to strengthen the country’s autonomy in strategic economic sectors. 

The EU has no option but to follow suit and the notion of strategic autonomy championed by France’s Emanuel Macron must no longer remain a buzzword. 

The EU needs to have economic and infrastructural security to ensure the European lifestyle continues with peace of mind and fewer disruptions. 

The EU First mantra should translate into an ambitious low-tax, high-subsidy model to encourage private investment in strategic areas. 

It is pretty much the Malta model adopted as a means of survival by subsequent administrations since the 1960s, where the State used its resources to encourage private investment that in turn created jobs and contributed to economic growth. 

Businesses in strategic sectors across the EU should benefit from low taxes and investment incentives, coupled with subsidies on infrastructural works, research and development and training. 

The EU must be able to encourage expansion and bring home: high-tech manufacturing, chip makers, electric car production, industrial-scale battery production, and scientific research with a particular focus on medicinals, artificial intelligence, renewable energy, and food production. 

State aid rules in these sectors must be re-evaluated. Something similar has already been adopted in the chip-making sector with STMicroelectronics being one of the beneficiaries. 

A similar strategy must now be adopted in the electric car industry and other sectors such as the exploration of minerals required in the production of microchips and batteries to lessen dependence on China and outside sources.  

Malta should also be able to benefit from such a strategy when it comes to exploiting its offshore exclusive economic zone by investing in floating wind and solar energy farms. 

On the energy front, the EU must use its largesse to strike strategic deals with all countries on the North African coast to invest in large solar farms in the desert to deliver clean energy across the Mediterranean Sea. These projects must be accompanied by investment in educational and economic development in these countries, thus also providing lasting solutions to the immigration problem. 

Malta has signed a memorandum of understanding with Libya in this regard but a more solid EU framework is required with the more stable countries like Morocco, Algeria and Egypt. 

The EU is a global powerhouse but a fragmented one at that. It is a large free market with its internal idiosyncrasies. But in a changing international scenario where even friends like the US are looking out for themselves, the EU cannot continue living in Cloud Nine. It’s time to step up. It’s time to think and act EU First and Maltese politicians have the duty to identify those strategic areas applicable to Malta so the island is not left out of these developments.