China has been, and still is, the factory of the world. The shock caused by the entry of its manufacturing exports into the world market contributed to deindustrializing the US “rust belt” and bringing Trump’s populism to the White House. Good jobs were lost, which either disappeared or were replaced by others of less quality in the service sector. Now, both the US and Europe, including Spain and Catalonia, want the industry to gain weight. In Catalonia, the agreement with the Chinese firm Chery to assemble electric vehicles in the old Nissan plant in Barcelona has been experienced with joy (with an electoral touch).
China has become the most efficient producer of electric vehicles and is ready to invade the world with these high-quality and well-priced vehicles. Elon Musk has said that Tesla cannot compete. China is also more efficient at manufacturing solar panels and wind turbines. This has not happened by chance, but through careful planning using the idea that a nascent industry must be protected and subsidized to achieve economies of scale and reduce costs until internal production is more competitive than foreign production. These savings were achieved in solar panels due to subsidies for their purchase in countries such as Spain and Germany.
China also controls much of the supply and processing of minerals and rare earths necessary for electrification. Beijing has decided to continue being the factory of the electrified and digitalized world. He does not want to leave technological supremacy to the West, whether in advanced chips or artificial intelligence, which have a military aspect.
The US is willing to avoid China’s bypass by limiting the transfer of advanced technologies. At the same time, the Western world cannot disconnect from it, since supply chains are very intertwined. The recent visit of US Treasury Secretary Janet Yellen to China, as well as German Chancellor Olaf Scholz, demonstrates this. Competition in new technologies is fierce and both the US and Europe return to industrial policy and protectionism to compete with the Asian giant. In Europe there is a question of how to have strategic autonomy. Will the stated objectives be achieved? Will there be an industrial renaissance and job creation?
Firstly, there is a tension with the objectives of fighting climate change. If we buy the panels, turbines and electric vehicles from China, we will electrify faster, since their products are cheaper, but at the cost of not developing local industry and associated jobs. Emerging countries will buy Chinese products. Secondly, at best not many jobs will be created by automation and increased productivity. The bulk of good jobs will have to be created in advanced services and not in manufacturing.
Thirdly, Europe, in contrast to the US, is highly dependent on energy, so it is not attractive to produce there. Furthermore, it lacks political and economic integration to achieve economies of scale to compete with the US and China, as proposed by the recent report by Enrico Letta and the radical change requested by Mario Draghi. Without this leap forward we could remain trapped in protectionist and subsidy wars that we cannot win.