Big Western firms, not consumers, are beneficiaries of trade protectionism
Europe was once the world’s leader in terms of the development of wind energy, but right now, some industry leaders have to resort to trade protectionism to stave off competition from China. This is the tragedy of Europe’s wind power industry.
Siemens Energy CEO Christian Bruch said in a recent interview with the South China Morning Post (SCMP) that Europe’s wind power sector will suffer the same fate as its devastated solar industry if authorities do not cut market access for “cheap” Chinese wind power equipment.
Therefore, the company would back “a combination of either a quota or qualitative criteria” to boost the EU wind sector and make it more difficult for Chinese competitors to gain a foothold in Europe. This scenario is quite ironic: When European industry leaders openly discuss trade protectionism measures, they have no sense of guilt and they have shown no sign of respecting “the rules-based order.”
Bruch’s words come as
European companies face fierce competition from Chinese competitors in the wind power sector. China has emerged as an important player in global wind power generation, with some statistics showing that the country’s manufacturers supplied nearly 60 percent of installed capacity worldwide in 2022. This achievement was largely driven by Chinese manufacturers’ low price advantage.
The price advantage can be attributed to multiple factors, including a complete industry chain, relatively low labor costs, a large and relatively high-skilled workforce, and scientific and technological innovation. All these factors are not the reason for the Western companies to resort to trade protectionism to suppress their Chinese counterparts.
In the face of fierce competition, European wind turbine manufacturers are financially struggling, putting them at risk of losing market share to Chinese competitors. As reported by the SCMP, Siemens Energy has had a troubled year. In November, amid major losses at its wind energy subsidiary and struggles to secure commercial lending, the company tapped the German government for loan guarantees worth 7.5 billion euros ($8 billion).
If the EU takes actions to fend off Chinese wind power imports, as Bruch has suggested, protectionist measures may alleviate pressure on European enterprises, but the negative side effects shouldn’t be neglected.
First, bowing to trade protectionism means Europe will face growing pushback against policies to address climate change and protect the environment. The EU aims to be climate-neutral by 2050 – an economy with netzero greenhouse gas emissions – but making the goal a reality will not be easy.
Second, if the EU builds a fence blocking off affordable Made-in-China products, trying to give European wind companies an unreasonable competitive advantage, then an increase in energy prices will be transmitted to European consumers.
In 2022, Time.com reported that benchmark electricity prices in Europe had surged almost 300 percent in 2022 on a yearly basis, breaking records. Consumers in European countries have already felt the pain of rising energy costs. Policymakers should prevent the situation from getting worse.
If European policymakers choose to protect the interests of large energy enterprises instead of ordinary consumers at the cost of missing emission reduction goals, this would indeed be an unwise decision.
Moreover, trade protectionism can only provide a “breathing spell” during which European companies may temporarily stave off competition from China. But this cannot help them win market share. On the contrary, protectionism will erode the long-term competitiveness of these companies and cost the European economy dearly.
A global transformation toward a green economy will create huge market opportunities. The market is big enough to accommodate both Chinese companies and the European companies. What the EU and China need to do is to ensure fair competition. It’s the only way to achieve mutually beneficial cooperation.