Insight
Coronavirus is pushing the EU in new and undesirable directions by Charles Grant 15 May 2020
It is far too soon to judge how COVID-19 will transform the EU – we are still in the early phases of a story that will last for several years. But one can tentatively say that six trends which emerged before the virus struck are now accelerating: greater economic autarky, a bigger role for national capitals, a strengthening of borders, a backlash against green policies and widening of both east-west and north-south divisions within the EU. In various ways all these trends are likely to help the cause of anti-EU populists. Deglobalisation COVID-19 has given extra ammunition to those arguing for greater national or European self-sufficiency. Long before it arrived, there was talk of ‘deglobalisation’ and ‘reshoring’ supply chains. This stemmed in part from politics: Donald Trump’s protectionist policies threatened international supply chains, as did the UK’s pursuit of a hard Brexit and EU plans for border taxes to reflect the carbon emitted during the manufacture of imports. The arguments of many green and other politicians that free trade agreements undercut European social and environmental standards were gathering traction. But economics was also important. Wage differentials between emerging economies like China and rich countries were diminishing, reducing the advantages of offshoring production. Furthermore, new technologies such as 3D printing were promising easier and cheaper manufacturing at home. Since the arrival of COVID-19, concerns about the security of supply of drugs, medical equipment and even key components for the car industry have strengthened the hand of those arguing for more national or European autonomy of supply chains. Those concerns have blended with a general worry about dependence on China, which Huawei’s attempts to provide 5G telecoms equipment to Europe have reinforced. The European Commission is preparing a report on what it sees as Europe’s dangerous dependence on imports of rare-earth metals from a handful of countries, including China. Before the virus struck there was a movement to make EU rules on competition policy more accommodating of ‘European champions’. The EU is considering revising the criteria for deciding the relevant market when considering proposed mergers; a focus on monopolies in global rather than CER INSIGHT: Coronavirus is pushing the EU in new and undesirable directions 15 May 2020
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