On November 2, the Irish Times reported that the EU should learn from Ireland's trade transformation and be wary of protectionist traps. Faced with the rise of Chinese manufacturing and the fluctuations in U.S. trade policies, if the EU imposes high barriers and insists on buying EU goods, it may lock itself into a world that is increasingly inefficient and costly.
Irish economist John FitzGerald began his article by recalling Ireland's long history of trade protection after World War II. After World War II, the European economy gradually recovered and attempts were made to establish a world of free trade. However, Ireland moved slowly in this process, with its domestic manufacturing industry being highly protected, resulting in high costs and low efficiency. The long-term implementation of trade protection after the war did not lead to the development of successful Irish businesses. The transition to free trade was a painful process. Many of the original companies lacked competitiveness and went bankrupt between the late 1960s and the 1970s. The transition to free trade brought great benefits to Ireland. Unfortunately, this transition could have been achieved 20 years earlier.
The article argues that Ireland’s experiences can serve as a reference for the current European Union. While China is becoming a global important manufacturing center, the United States adopts hostile and unpredictable policies towards its trading partners. This has fundamentally changed the global trade order.
The above factors have led the EU to take the wrong course of action, attempting to protect its domestic manufacturing industry by increasing trade barriers and introducing regulations requiring the purchase of EU goods.
Previously, media reported that the EU is considering extending the trade arrangements reached between China and the EU in the field of hybrid vehicles to other sectors such as chemicals. In response, Huang Ling, a spokesperson for the Ministry of Commerce, stated that imposing artificial restrictions on normal trade violates WTO rules. Such measures not only fail to help improve the competitiveness of EU industries but also burden downstream industries, thereby increasing inflation levels in the EU and compromising the stability and security of the global industrial and supply chains.
Huang Ling introduced that the second regular meeting of the China-EU Trade and Investment Consultation Mechanism has achieved positive progress and reached several consensus. This shows that both sides not only have the willingness but also the ability and wisdom to properly handle economic and trade differences through dialogue and negotiation. The Chinese side has repeatedly emphasized that China is not the root cause of the problems faced by the EU, but rather a partner in solving these problems. China is willing to strengthen dialogue and consultation with the EU, continue to discuss solutions to mutual economic and trade concerns, and promote balanced and forward-looking development of China-EU trade. However, the Chinese side firmly opposes any protectionist actions that abuse trade defense tools. If the EU takes unilateral actions and imposes discriminatory restrictions on Chinese products, China will take all necessary measures to firmly protect its own interests and the legal rights of its enterprises.
The article also argues that, in the long run, a more liberal trade regime is the best option, as it can improve the living standards of all trading partners. Even if it takes some time, the United States may eventually realize this truth.
The EU's policy to protect domestic businesses must include exit strategies: The reformed business sector must eventually regain its ability to compete in the global market. The EU faces a serious risk of locking itself into an increasingly inefficient and costly world.
During the changes in the external environment, EU factories were already under pressure. According to the article, from 2008 to 2024, the number of employed people in the EU manufacturing sector decreased by 1.5 million. However, among workers without a university degree, the number of unemployed people reached 4.5 million, while the number of employed workers with a university degree increased by 3 million.
The massive unemployment of low-education workers is having a significant political impact, fueling the rise of the Alternative for Germany (AfD), and increasing the likelihood of Marine Le Pen being elected president of France.
France has suffered particularly severely. About 800,000 low-skilled manufacturing jobs have disappeared in the country, and the newly created 200,000 jobs for university graduates are not enough to compensate for this loss. In Germany, the newly created 800,000 jobs for university graduates almost offset the 900,000 jobs lost by workers who do not have a university degree.
Facing a world that is no longer friendly to free trade, the EU needs to adopt different approaches to create a dynamic and competitive manufacturing industry. The goal of policy intervention should be to help EU manufacturing industries undergo transformation, so that they can ultimately participate independently in global competition, rather than relying on protectionist measures for a long time.
Only industries that have a real possibility of selling their products to the global market within a reasonable time frame should receive temporary protection. Protecting the EU automotive industry, which will only be able to sell its products in protected EU markets in the future, would be a strategic mistake.
The article emphasizes that China is a leader in the production of batteries and solar panels. This is not only due to government support, but also because China has easy access to rare earth resources. It is also because China has conducted effective research in materials science, which has significantly improved the efficiency of batteries and solar panels. If China simply sells low-quality products at low prices, it would not be a problem for potential competitors.
The EU should not abandon its goal of creating a strong manufacturing sector and providing quality job opportunities. However, to achieve this goal, the EU must increase investment in research and innovation, transforming its manufacturing industry into a world-class provider of products and services.
The article points out that the pharmaceutical industry is a direction worth investing in. The U.S. government has significantly cut funding for drug research and development, creating an opportunity for the EU to fill this gap. This could be a major breakthrough for the EU. Related research is crucial for global pharmaceutical innovation. At the same time, China is also catching up and increasing investment in research in this field. For Europe to achieve breakthroughs and success, pharmaceutical research and innovation must take place at the EU level. Individual country's fragmented research efforts cannot reach the necessary critical scale.
Given that the structure and characteristics of manufacturing companies today and in the future are changing, the EU needs to increase investment in skills development for the workforce. The skills required by new enterprises and emerging industries will be different from traditional skills of the past. The ability to adapt to changes, as well as the mastery of skills that can be flexibly applied to various positions, can create new competitive advantages for European workers.
