Tobias Gehrke is a Senior Policy Fellow at the European Council on Foreign Relations.
How do you deal with China’s economic distortions? Donald Trump’s answer is simple: break the rules and use tariffs. In Brussels, a different strategy is taking shape, one which attempts to innovate with new deals and new rules.
To succeed, Europeans must trade in their one-size-fits-all trade agenda for a Swiss-Army-knife: a versatile toolkit that solves trade, green industrialisation, and economic security issues all at once.
The latest Brussels innovation to attempt to square that circle is called Clean Trade and Investment Partnerships, or CTIP for short. These are basically mini trade deals meant to complement the much bigger free trade agreements (FTAs) by being faster, more flexible and more targeted. A first partnership with South Africa has been announced and others may soon follow.
The problems CTIPs must resolve are clear: battery gigafactories, green steel mills and hydrogen hubs are redefining the global economy map and will be tomorrow’s bedrock of industrial power. But the manufacturing juggernaut that is China threatens to leave little room for green manufacturing elsewhere. That’s bad politics (the green transition needs equitable stakes for many) and bad geopolitics (dependencies on a systemic rival should be avoided).
The strategy must therefore be to anchor clean tech manufacturing and alternative supply chains in Europe and its many partners. This requires speed, versatility, and all economic tools reinforcing each other.
Here’s how the Swiss Army knife metaphor can answer the challenge Europe faces.
The first tool in any Swiss Army knife is the main blade, which does your general cutting. CTIPs, too, must cut, mainly through trade hurdles. But focus is important. Batteries, solar, wind, hydrogen and the energy and critical minerals powering them must be the key targets. One way to help trade in these sectors would be the mutual recognition of conformity assessments for clean tech products. These would remove the need for duplicated testing and certification of certain products, thereby reducing costs and red tape.
Solar offers a good industry for CTIPs to focus on: 97% of EU panels come from China – a dependency which carries a great many risks. Yet Europe is too costly a place to manufacture them at scale. India, by contrast, is racing to build a solar industry that could, in time, rival China’s dominance. Offering trade opportunities, capital, and expertise could be a win for India and a win for Europe: it could lower Europe’s dependency risk profile and could also increase exports in engineering services and machines.
The second tool of any Swiss Army knife is the screwdriver. Europe’s new trade deals must also tighten the screws on its economic security and decarbonization agenda. Beijing’s towering dominance over entire clean tech value chains means that competing with China on price is often a lost cause. If the lowest price is the default for any purchase, de-risking will remain a pipe dream.
Instead, Europe should introduce (and enforce) non-price considerations into public purchases and for critical infrastructure providers, such as energy utilities. Whilst regulatory framework does seek to address this – for example considering a supplier’s level of diversification or cybersecurity credentials – this remains mostly toothless. Rather than only focusing on “Buy European” clauses, the EU should consider “Buy Trusted Partner” criteria for clean tech products. Agreeing to a CTIP should become a quick and reliable way to become a trusted partner with preferential access to the single market.
The third tool of any Swiss Army knife is the corkscrew, which can pop open your wine. But to remove the cork, you need to apply leverage. Europe’s new trade deals also need leverage. Brussels must demonstrate to prospective partners (and the business community) that it can jumpstart any trade deal, and quickly. This means bringing money to the table.
The Global Gateway is the main tool for such leverage. Under its umbrella, European governments are investing in infrastructure projects around the world. What gets funded, however, has been too often siloed from Europe’s broader trade and industrial agenda. To get more bang for its buck, Europe’s investments need to focus on supporting industry and trade integration. This could be a local energy grid in an industrial cluster for processing raw materials or manufacturing battery precursors. Such public investment plans should be bolted to every CTIP.
Wielded wisely, Europe’s new clean tech trade deals can become a blueprint for how it wants to engage with the world. Just when Trump is turning the world upside down with tariffs and threats, the EU might have a chance to demonstrate an alternative vision of trade, green industrialisation, and economic security.