France in particular, but also Germany and Italy are strongly pushing for European companies to start being supported more than at present in the competition against the United States and China.
The rush is due to the fact that the old trade partner, the United States, has started a straightforward investment attraction with the legislation that came into force at the beginning of the year. A company can get hefty subsidies if it manufactures its products in the United States.
President Joe Biden despite persuasion, the administration has not promised European products any special status, at least for now.
If the European Union and the United States drift into a trade policy fight, small European countries will suffer first and foremost.
Read more: The United States threatens European industry with its support package – the EU, which is driven as an underdog, may even end up in a trade war.
We asked representatives of the Finnish business community and employees what is essential in the current situation.
There are at least four reasons why Finns should hope that a trade war and the ensuing tussle in international trade will be avoided.
1. Protectionism benefits big countries
The EU Commission supervises and decides on state aid policy in the internal market. Its task is to monitor that the competition remains fair for all parties.
Now, due to pressure from member countries, the Commission plans to at least temporarily relax the rules by which governments can distribute business subsidies. How, we will find out later.
The problem for Finns is that big countries can afford to support small companies more.
It means that we may not have new jobs, the head of international affairs of the central trade union organization SAK Pekka Ristelä says.
– The employment benefit of Finns will not be achieved in the energy and climate transition, if job opportunities arise in other countries as a result of such an unfair competitive situation, Ristelä formulates.
The confederation of business and industry in EK agrees.
– If the EU drifts into a significant competition for state aid with the United States, it will appear to us inside the EU that the big member countries support their companies massively, and we small ones don’t have enough chips to begin with, head of EU influence and trade policy Petri Vuorio says.
2. Taxpayers have to dig their holes
If and when countries start protecting and supporting their own industry, it will be more difficult for outsiders to enter their markets.
In such a protectionist situation, barriers to trade arise. It is important for export-led Finland that international trade works. We also have a need for business subsidies.
Since some countries can afford to support their production more than others, a common “sovereignty fund” is being planned in the EU. Companies from the poorest and smallest countries would also get money for investments from there.
Finland has traditionally wanted to keep the EU budget and spending as small as possible.
Still, both EK’s Vuorio and SAK’s Ristelä consider the jointly supported investments reasonable.
– From Finland’s point of view, it is a better solution to do it together at the EU level than to have each country on its own, says Ristelä.
However, in Vuorio’s opinion, such a new “sovereignty fund” should be built on the basis of already existing funds and budgets. For example, part of the funds of the EU’s over 800 billion euro recovery fund created for the corona recovery are still unused.
– In addition to that, national state aid exemptions for a total of 630 billion euros have already been approved in Europe just as a result of the corona pandemic and Russia’s war of aggression, says Vuorio.
In his opinion, new money is not necessarily needed.
3. The most efficient technologies suffer
From the point of view of Finnish economic life, the green growth promoted by the EU Commission – investments to prevent climate change – is an opportunity to sell more and get new customers. Finland is one of the leading countries in environmental technology.
In a trade war, it can become a problem that orders from Finnish companies run away to big countries when they get better subsidies.
– If different support models arise, in which each country strives for its own investments and strengthening of its own production, then the most effective solutions may not be realized, says Ristelä.
According to EK’s Vuorio, Finland could lose, for example, in investments in renewable energy or battery production.
– We also talk about manufacturing products, and how our products will fare in the world if we don’t get the same subsidies as in competitor countries, Vuorio says.
4. Collective debt can be promoted under the guise of a trade war
Among the large EU countries, France, for example, has traditionally financed its industry in a state-led manner.
Even in Germany, there is now talk of deindustrialization, i.e. moving industry to other parts of the world, when energy has become expensive in Europe as a result of the Russian war of aggression.
The need to intervene in free trade and support the economy from taxpayers’ pockets has existed since the beginning of the Russian war of aggression.
EK and SAK hope that possible easing of state subsidies would remain temporary and would not attempt to change industrial policy permanently.
Demands for the EU’s new collective debt have also increased again as trade policy has tightened, the finance minister said Annika Saarikko (middle) told STT (you switch to another service) from the beginning of the week in Brussels. For example, Italy would like to finance a new sovereign fund with collective debt.
The good side: Climate action is accelerating
The positive thing about the trade situation is that the EU and the United States will rapidly invest more than a thousand billion euros in the green transition in the coming years.
When you add up both the EU’s recovery fund, the US climate package and the packages of individual EU countries, you arrive at huge sums.
According to SAK’s Ristelä, the new subsidies planned now cannot be considered solely protectionist and harmful, when their goal is to enhance measures against climate change and improve the position of employees at the same time.
– If we speed up the green transition, it will create important new opportunities for our technology exports, says EK’s Vuorio.
The heads and women of the EU countries will evaluate the trade policy weapons in use at their summit in early February. The commission has asked member countries for comments on the relaxation of state aid rules by next Wednesday.
Decisions are made throughout the spring and summer.
Does the danger of a trade war raise thoughts? You can discuss the topic until 11 pm on Saturday evening.
More on the subject:
The United States attracts important green technology investments for Europe – asked experts if there is reason to worry
The export of environmentally friendly products already exceeds greenhouse emissions in Finland