Editorial | EU First: Adopting the Malta model

In August, US President Joe Biden signed a law committing $280 billion to high tech manufacturing and scientific research amid fears that America was losing its technological edge to China. The investments include tax breaks for companies that build computer chip manufacturing plants in the US.

This massive aid package is already reaping  results with Taiwanese chipmaker TSMC announcing an expanded investment in Arizona to the tune of $40 billion.

The underlying rationale behind America’s subsidy drive - because that is what it is at the end of the day - is to strengthen the country’s autonomy in strategic economic sectors.

Some have dubbed this as the end of global free trade and within this changing international geopolitical environment, the EU - one of the last bulwarks of free trade - must stand up for itself.

The notion of strategic autonomy championed by France’s Emanuel Macron must no longer remain a buzzword.

Finnish Prime Minister Sanaa Marin during a recent visit to Australia said the EU lacks the military strength to stand up on its own two feet without US help.

She is right but this should not only be about military strength. The EU needs to have economic and  infrastructural security to ensure the European lifestyle continues with peace of mind and fewer disruptions.

The Ukraine war, or rather, Russia’s belligerence, exposed weaknesses in the EU’s military and energy sectors. The COVID restrictions in China that disrupted international trade flows left European companies at the mercy of the Beijing bureaucrats.

The EU First mantra should translate into an ambitious low-tax, high-subsidy model to encourage investment in strategic areas.

It is pretty much the Malta model adopted as a means of survival by subsequent administrations since the 1960s.

Businesses in strategic sectors across the EU should benefit from low taxes and investment incentives, coupled with subsidies on infrastructural works, research and development and training.

The EU must be able to encourage expansion and bring home: high tech manufacturing - chip makers, electric car production, industrial scale battery production - scientific research with particular focus on medicinals, renewable and nuclear energy development, the homegrown arms industry, and food production and manufacturing.

State aid rules in these sectors must be re-evaluated, while tax cuts and incentives should make it attractive for companies like STMicroeectronics to renew and grow their European manufacturing plants.

The EU must also encourage exploration of minerals required in the production of chips and batteries.

On the energy front, the EU must use its largesse to strike strategic deals with all countries on the North African coast to invest in large solar farms in the desert to deliver clean energy across the Mediterranean Sea. These projects must be accompanied by investment in educational and economic development in these countries, thus also providing lasting solutions to the immigration problem.

On the security front, the EU must have the operational capacity to deploy military personnel and hardware, while ensuring member states modernise their armies and defences.

The EU is a global powerhouse but a fragmented one at that. It is a large free market with its internal idiosyncrasies. But in a changing international scenario where even friends like the US are looking out for themselves, the EU cannot continue living in Cloud Nine. It’s time to step up. It’s time to think and act EU First.