US raises walls, EU to follow
After the US turned away from free trade and imposed tariffs on most of the world - and in particular China, the EU got really scared that China now will flood Europe with cheap products it can no longer sell in the US.
So the EU - founded as a champion of free trade - now looks poised to ‘going Trumpian’ and erect trade barriers against the Chinese inflow.
Most of us will think that should be welcomed - finally the EU starting to leave the dogma of free trade behind.
Better to leapfrog China
But Cornel Ban thinks otherwise - better than a trade war is to leapfrog China.
His argument is that Europe has the labs that produce the most advanced technologies, but lacks the financial infrastructure to industrialize them and rapidly scale up production.
Looking at China he sees ‘a continent-sized innovation machine with dense innovation-industrial ecosystems giving birth to industrial superscalers’. Looking at Europe he finds that ‘it was never short on capital - it was short on the will to put that capital to work’.
EU falling into the tariff trap
I thought ‘putting capital to work’ should be the task of capitalists, and they surely have enough of it. But Ban talks about the ‘capital’ (taxed money) in the bunch of EU funds. And these lack the will because they are scattered around and not coordinated.
So the problem is lack of governance, not capital. Question is how much governance? Ban thinks it doesn’t require Europe to become China - with developmental-state discipline and no-limts state-directed capital. It just does require a coordination mechanism moving a fraction of pension funds into the second valley of death. But Europe doesn’t seem capable of even that, so it enters the Trump Trap.
Even if Europe could, should it?
All this is competition logic. We are in the middle of a run and as China coming from behind pulls in front of us the instinct is to gear up and regain the lead.
But why are we running at all?
Where is the run headed? If you ask me, further and further into a mess. It seems we started running just because the other did so. We started running because of the fun of running. But it is no longer so.
Put your finger in the ground. EU’s overshoot day in 2026 was April 29 - and it still creeps backwards. That is due to the race we are running.
Leapfrogging China means keeping running in the wrong direction.
Turn: economics of scope, not scale
The paradox of EU - the ultimate free trade defender - now trying to raise barriers towards trade is a golden opportunity. Finally, the neo-liberal trade logic has got a punch.
The EU should now be turned into quite another animal. A champion of resilience, sustainability and local production.
That’s what we need and leapfrogging China is not required.
Not GDP, but OR - Overshoot Reversal - should be the guiding indicator.