In a keynote speech delivered at the prestigious Sorbonne University on 25 April, The French President Emmanuel Macron gave an alarmist view on the prospects for Europe. He went as far as posing the question: Is Europe at risk of dying?
The President stressed that Europe needed to take bold action to tackle both American and Chinese protectionism. Macron had a clear message on the alliance between Europe and the US: ”However strong our alliance with America is, we are not a priority for them”, he added that the U.S.: ”have two priorities: themselves – fair enough – and China.”
A solemn and bleak message, intended to be a wake-up call for Europe: Europe under-invests in technology, fails to protect its industries, and it must boost its military and its defenses. Macron stressed that Europe must show that it is never going to be a vassal for the U.S. when it speaks to other regions of the world.” A comment that echoed his heavily criticized remarks on Taiwan from a year ago, where he argued that Europe should not take its cue on Taiwan from the U.S. agenda and a Chinese overreaction. I am sure this part of the speech was read with particular interest in Beijing, where the Ministry of Foreign Affairs now is preparing Xi Jinping’s visit to Paris in May.
President Macron is not alone in taking an alarmist view of Europe. Former Italian Prime Minister and former President of the European Central Bank Mario Draghi also called for radical changes in a speech just one week earlier in order for Europe to stay competitive against China and the U.S.
Draghi is currently drafting a report for the European Commission on Europe’s competitiveness, and his speech gave a solid hint of what to expect when the report is published by mid-summer. On the one hand, Europe is facing overcapacity from China in key sectors. On the other hand, the U.S. is attempting to attract European firms to produce within the borders of the U.S., whilst using protectionism to shut out competitors, including from Europe, from the U.S. market.
Another former Italian Prime minister Enrico Letta added his alarm to the mix. Back in June 2023, Letta was charged to write a report on how to make the European single market fit for purpose. A key message in his now published 147 pages long report was that Europe’s economy is falling behind and action has to be taken now in order to catch up with the U.S. Letta’s main point was one of the need for European consolidation, allowing companies to grow more easily within the single European market.
Macron, Draghi, and Letta all have a message of urgency. They see the need for Europe to adjust to the new geopolitical realities, rather than strictly adhering to what is now seen as yesterday’s rulebook.
The urgency is easy to understand GDP in Europe is barely growing whereas the US and China are growing by 3 and 5 percent respectively.
The questions that Macron, Draghi, and Letta are seeking to answer are not unique for Europe.
Countries around the world are caught by the U.S. and China rivalry, and are facing similar challenges. Recently the South Korean Trade Minister Ahn Duk-geun spoke about the difficulties faced by Korean car manufacturers seeking to benefit from the tax credits offered by the Biden administration for buyers of electric-vehicles in the US. He went as far as saying that it was nearly impossible for Korean electric-vehicle makers to qualify for the U.S. subsidy scheme.
Despite this concern, the Korean trade minister was positive as he believed that Korea would benefit from a de-risking strategy followed by many countries.
It should be noted here in Taiwan that part of the Korean trade minister’s optimism was because he believed that countries would reduce their dependency on not only China, but also on Taiwan. If the trade minister is right, then his optimism should be matched by concern here in Taiwan.
In fact, the questions asked in Europe on how the very generous subsidy schemes now in place in the U.S. and China will affect the competitiveness and the localization of European industry are questions that are relevant for Taiwan. The consensus in Taiwan seems to be that its semiconductor industry is firmly located in Taiwan and that any attempt to de-locate it, or key elements of it, will not succeed.
However, the flip side of this argument is that is assumes that the U.S. strategy to re-locate the industry will not succeed, and that is an assumption that should not be made easily given the strong political push there is in the U.S. to relocate production back to the U.S. In an article in the Financial Times on 26 April, Chris Miller, author of the book ‘Chip War’ argues that the US ‘Chips Act’ so far has been surprisingly successful. Time will show how European and Taiwanese industry will fare during this global effort to de-risk supply chains. But as stressed by Macron, Draghi and Letta, we are facing a new world where adhering yesterday’s playbook no longer is sufficient.
One thing is to sound the alarm, another is to chart and to decide on the road forward, Europe (and not only Europe) must first answer the question asked by Macron at the end of his speech: “We can even ask ourselves, what is a nation? What does Europe want to become?”
Clearly President Macron, together with Draghi and Letta, are seeking to chart the road for a stronger and more independent Europe: a Europe that is no-one’s vassal.
