by Mathieu Rosemain and Leigh Thomas
AIX-EN-PROVENCE, FRANCE (Reuters) – European companies fear they will be caught in the crossfire of the growing economic rivalry between the United States and China, executives present at the Aix-en-Provence Economic Meetings Provence (Bouches-du – Rhône) who are frustrated by Europe’s slowness to develop a response to this situation.
Growing trade tensions between the two superpowers add to other challenges for politicians and business leaders, who face a nearly closed European economy and the uncertainty of having to adjust to either a hard landing, hard or soft.
“We are particularly aware of the current tensions between the US and China,” said Florent Menegaux, president of French tire maker Michelin.
“Geopolitics obviously have an impact on the way companies work,” he added, indicating that Michelin was in the process of reviewing the supply of certain components to avoid over-reliance on China.
Seeking alternative sources of raw materials or overhauling supply chains to reduce exposure to China – called “derisking” in the West – has been driven by Beijing’s recent restrictions on exports of two key commodities, gallium and germanium, used to make semiconductors.
“We are paying for the competition between China and the United States,” said Jean-Dominique Senard, the president of Renault, referring to Chinese restrictions while Europe is in the grip of what he calls a “Chinese storm” that threatens the electric car industry.
China’s show of strength in supplying key metals comes after years of strategic investment and should come as no surprise, said Christel Bories, CEO of mining group Eramet.
IRA GENERATING FRUSTRATION
“They’ve built monopolies and they’re using them,” she said.
“On the battery value chain, it’s not just about controlling the chain, but also about controlling costs,” Christel Bories said, adding that China was building another monopoly on battery supply. Nickel and cobalt – which are also key components in batteries – in Indonesia.
European leaders are also increasingly frustrated by the consequences they believe the US Inflation Reduction Act (IRA) could have on some large industrial groups whose energy bills are still much higher than in the US.
“When you look at the impact the IRA will have (on European companies), I think we haven’t talked about it enough at this conference,” said one senior banker. “The risk is high that European companies will move their investments (from Europe to the US).”
Some believe the biggest concern is the time it takes EU authorities to respond.
“With the IRA, there is some stability about what companies should expect in the US,” Veronika Grimm, one of the German government’s top economic experts advising the chancellery, told Reuters.
“Meanwhile, we are debating in Europe whether we should have subsidies and whether we should tax super profits.”
Heather Boushey, a member of the White House Council of Economic Advisers who attended the conference, defended the IRA and said the United States would remain loyal to its trading partners even as it reconsidered its role in the global trading system. .
“I understand the frustration, but if you look in detail at the extent to which the US subsidizes its domestic industry, it is no more important than what the Europeans themselves do,” she said.
The few Chinese leaders present at the conference, meanwhile, pointed out that Europe had become a battleground not only for Chinese dominance but also for US dominance in technology.
“The risks don’t just come from the east,” said a top executive from a Chinese group on the sidelines of the conference. “They can also come from the West.”
(French version Benjamin Mallet)
Copyright © 2023 Thomson Reuters