EU accused of being like China with mass state subsidy programme and harsh import limits

The European Union is fundamentally revamping its policies on dealing with critical raw materials, imposing limits on imports from countries like China while unleashing subsidies and other financial incentives to ramp up home production, according to angry MEPs.

The plans by the European Commission, the EU’s executive arm, are essential in moving toward a climate neutral economy, while also increasing its strategic independence in a shifting world of geopolitical alliances.

“The EU is upping its game,” Internal Market Commissioner Thierry Breton said.

But they have been lambasted across Europe over the danger of following China’s example at the expense of taxpayers.

Italian MEP Marco Zanni said it was the “greatest exercise” of state control over economic matters “ever seen in Europe” and that the subsidies bind the bloc “hands and feet” to Beijing.

Overall, critical raw materials are used in anything from solar panels to heat pumps and electric cars.

At the same time as seeking to disengage from Chinese dependency, the EU is seeking to build up a select Critical Raw Materials Club of alliances, with the likes of the United States and Canada, to further cement the Western bloc in an increasingly unstable global environment.

“We’re strengthening our cooperation with reliable trading partners globally to reduce the EU’s current dependencies on just one or a few countries,” European Commission President Ursula von der Leyen said.

The plans still need to be approved by the EU’s 27 member states and the parliament, a process that is set to take many months, perhaps over a year.

To achieve its clean technology and strategic goals, the EU is making a major economic turn away for preaching the free-market economic gospel for decades and accepting very flexible state aid rules and subsidies as key ingredients to achieve its goals as the bloc has to move from a fossil fuel to a green economy.

“Private financing alone may not be sufficient and the effective rollout of projects along the critical raw material value chain may require public support, including in the form of state aid,” the European Commission proposal said.

It added that it already had adapted state aid rules “to allow further flexibility for the member states to grant aid.”

“The aim is to further speed up and simplify the process, with easier calculations, simpler procedures, and accelerated approval,” the Commission said.

The critical raw materials plan is set to be followed later by plans for the Net-Zero Industry Act on industrial incentives.