The EU single market turns 30 – looming trade war and other drawbacks

With a climate investment program worth almost 400 billion euros, US President Joe Biden is causing enormous difficulties for Europe. The innocent-sounding Inflation Reduction Act hides subsidies, tax credits and loans that experts warn endanger Europe’s economy and distort competition. There are fears of huge disadvantages for the EU car industry, European companies will be disadvantaged compared to US competition, production relocations and job losses will result, the Commission said in Brussels.

France puts pressure on action plan
French President Emmanuel Macron was among the first to push for an EU response. A few days ago, he discussed a “Made in Europe” action plan with the President of the European Commission, Ursula von der Leyen, in Paris. French economy and finance minister Bruno Le Maire is campaigning for the EU to allow “much more massive government aid” to member states to encourage domestic investment.

In order not to distort competition in the internal market, such state aid is actually prohibited. The requirements were already relaxed during the Corona crisis and Commissioner Margrethe Vestager now wants to adjust them further.

Warnings about sensitive subsidy competition always came from Germany. But that’s exactly what it should come down to. At the World Economic Forum in Davos, Switzerland, von der Leyen announced targeted funding. “To keep European industry attractive, it is necessary to keep pace with offers and incentives outside the EU,” said the Commission President. The plan provides for simplification of rules to create more favorable conditions for suppliers of products such as wind energy, heat pumps, solar energy and clean hydrogen. Further points include stronger financial support for environmentally friendly technologies, reduction of dependence on key raw materials, a program for the development of a skilled workforce and strong action against all non-compliant countries.

The Commission does not agree on the course
It is not more concrete so far. This is also due to the fact that there are two camps both in the Commission and in the Member States: those who rely on protectionism, i.e. the protection of domestic suppliers against foreign competition, and those who are open to free trade. It is not surprising that the Danish competition commissioner Margrethe Vestager supports the strategy that is already in her title. Internal Market Commissioner Thierry Breton from France is in favor of subsidies and new EU debt. According to Brussels, Von der Leyen is currently working on a viable compromise. This must then be approved by the Heads of State or Government.

Union: “EU watch out for wage dumping”
For another reason, the union sees no great reason to celebrate the anniversary of the single market. Because the prosperity promise of the EU has turned into a hard fight for the lowest standards at the expense of the workers. Josef Muchitsch, SPÖ member of parliament and chairman of the Bau-Holz trade union, focuses his criticism mainly on broadcasts abroad. “Black sheep” among the corporations blatantly exploit the wage gap between states and engage in social dumping to maximize profits, Muchitsch says. According to studies, every second posted worker is underpaid. Of course there are sanctions, but they cannot be carried out across the border.

Special case Slovenia: Austria suffers
Slovenia is the main sending country in the construction sector and Austria is the main destination country. A national scheme in Ljubljana allows lower social security contributions – many workers are brought to Slovenia from third countries, registered and posted to Austria – without having worked even a day in Slovenia.

“We have repeatedly pointed out the grievances, but the European Commission has still not taken a decision,” Muchitsch said. In February, the union makes another attempt and travels to Brussels for talks.