Draghi report on Europe’s competitiveness falls short – POLITICO

Therefore, it makes sense that Draghi recommends abandoning sectors where China’s cost advantage is too great – even if it is due to subsidies.

But he believes the automotive industry, and perhaps many other clean-tech sectors, are too important to be exposed to unrestricted Chinese competition. Therefore, Draghi recommends first tariffs to protect domestic producers and then – if China begins to invest in Europe – measures to enforce technology transfer.

This is exactly the approach that China is taking and which the EU has always criticized. Furthermore, protecting clean technologies domestically is unlikely to produce a competitive industry, as economies of scale can only be achieved in the global market, where there is no protection for EU producers.

This also applies to the total of 800 billion euros in additional annual investments that Draghi considers necessary. The total number is poorly documented. Just a short table (relegated to page 282 of the second part) shows that 450 billion euros – or more than half of the total – should be earmarked for the energy transition and the rest for digital defense and innovation. And while supporting the energy transition is necessary, much of the remaining financing needs actually come from the housing sector, which is more low-tech.

Although this table implicitly calls for spending €300 billion annually on digitalization and innovation, there is no indication of what type of projects or programs should be funded. Apart from occasional allusions to the need for subsidies, the only concrete reference is a throwaway line from earlier in the report that funding for the European Research Council should be doubled. However, this would cost 3 billion euros, not 300 billion euros.

Overall, Draghi’s report was well received in the Brussels bubble. Because when someone recommends spending 800 billion euros, no one looks at the small print.