The glut of Chinese exports of clean energy products are causing lots of gripes. How will they respond?
Europe’s sundry national officials, looking at a flood of dumped Chinese exports, are debating how best to “rebalance” European Union’s trade flows ahead of this summer’s elections for its parliament. And the rhetoric is getting spicy!
“We must show our teeth to economic rivals,” said French Finance Minister Bruno Le Maire on Thursday, according to Bloomberg. “The era of happy globalization is over and everyone needs to wake up — the era of a globalization of rivalries has begun.”
He can say that again. U.S. Treasury Secretary Janet Yellen is currently in China, admonishing her counterparts about Chinese industrial overcapacity. But, just like it is in the United States, Europe’s big industrial pivot represented by the green transition is an ongoing process, and quotes like the one from the French finance minister are aimed at driving it home… especially now, as China encourages its dominant clean energy manufacturing industries to export like crazy and juice its own economy. After all, we’re talking about the EU: Dozens of countries that maintain a single market. Not everyone is on the same page!
Germany, for instance, is another big pole in EU politics. It does a lot of trade with China and, not unlike the United States, plays home base to plenty of companies with significant investment in that country. Their exposure means their government worries about upsetting the apple cart and damaging relations with the Chinese government.
French companies, on the other hand, have largely left China, and French politics are decidedly different: It sees the apple cart as already upset. The French minister wants to use Europe’s relatively stringent environmental regulations to frame the rebalancing criteria. Here’s more from the Bloomberg article:
Paris is amping up its rhetoric on economic and trade policy as it aims to set the agenda for the EU after June parliamentary elections. While the call for a tougher stance has in the past run into German concerns about endangering commerce with the US and China, French officials see an opportunity for a shift as European economies struggle with prolonged stagnation.
“If we want to re-balance trade, it is necessary to have a re-balancing of environmental rules,” Le Maire said. “Everyone knows Germany is reluctant but it’s vital to work on this, otherwise we risk leaving wide open a path into the EU single market for goods that don’t respect environmental rules and don’t have the same cost of production.”
Strong environmental standards of course are not exclusive to Europe, of course. You’ll remember the U.S. and EU have long been in negotiations about a “clean steel” agreement that would reward the steel industries on both sides of the Atlantic Ocean for reducing their carbon emissions. Companies like U.S. Steel, which just announced the rollout of carbon-capture technology at its Gary, Ind., mill, or Cleveland Cliffs, which in 2020 put $1 billion into a plant to make significantly cleaner iron ore pellets for its own blast furnaces, would benefit from such a deal.
On the other hand, basing market access on the level of pollution the manufacture of a product causes would likely exclude a lot of exports from China. Take Chinese solar panel manufacturing, for instance, as laid out in Time magazine:
In Xinjiang Uyghur Autonomous Region, where the most energy-intensive step in the solar panel manufacturing process, polysilicon refining, is concentrated, coal accounts for 77% of power generation. As a result, a recent study found that solar panels manufactured in China produce 30% more greenhouse gas emissions than if this supply chain was reshored to the U.S.
Not entirely coincidentally: The EU launched this week investigations into Chinese solar panel manufacturers that are bidding to develop a big, EU-funded solar installation in Romania, which the bloc alleges received unfair subsidies.