This article is an onsite version of our Trade Secrets newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersHello, and I hope you enjoyed the Easter break. Next week I have a treat for you: Aime Williams, Trade Secrets alumnus and now FT Washington climate reporter extraordinaire, will be in charge. Until then, I’m afraid, it’s me. Today’s newsletter looks at two recent events, one involving a bunch of EU officials engaged in a closed-doors bureaucratic procedure that really might matter, and one involving a big set-piece public event with all sorts of European and American bigwigs that barely matters at all. Unilateralism, baby. Charted waters is on global food prices.Get in touch. Email me at [email protected] down the handoutsFirst, the one that matters. Last year the EU’s foreign subsidies regulation (FSR) came into force, allowing Brussels to block companies subsidised by foreign governments from public procurement bids, mergers and acquisitions and even simply providing goods and services in the single market. The idea behind it was to extend the EU state aid regime to governments around the world. In theory it’s a massive change, we all said. It could seriously affect Chinese companies’ ability to operate in the EU, we all said. It depends on the execution, we all said.Well, the internal markets directorate (GROW to its pals) has started announcing public procurement investigations, and they’re very interesting indeed. As my colleagues have detailed, the first was into a Chinese train company bidding to supply electric trains in Bulgaria, the second into two energy companies tendering for contracts in a solar park in Romania.To the evident delight of internal markets commissioner Thierry Breton, the train company pulled out of the bidding shortly after the investigation was announced. It’s quite a precedent to be setting — the China Chamber of Commerce to the EU has already said it is “gravely concerned” — and it underlines the potential power of the European Commission’s new tools.Here’s why.One, compared with investigations into trade defence instruments like antidumping and antisubsidy duties, FSR probes are fast. The deadline is 110 working days from the notification that a company is bidding on a contract to a decision on its eligibility. Two, they enable the commission to demand large amounts of data from companies to investigate direct or indirect subsidies, including loans from state or state-directed banks, export credit guarantees and sales to or from their home governments. China’s trading partners are always complaining about the difficulty of peering into Chinese companies’ opaque finances: here’s a pretty powerful spotlight.As seems to have happened with the train contract, Chinese companies might well think that trying to pass this scrutiny is more trouble than it’s worth. Bregt Natens at the law firm Baker McKenzie in Brussels says: “Once the commission starts probing, it will probably ask for a whole bunch of information that companies don’t like giving up, and if they don’t want to reveal it they’re probably just going to pull the plug.”Three, investigations can start automatically under the EU’s requirement for companies to notify it with information. They don’t rely on an EU competitor company or member state government kicking up a fuss. Compare that with the delicate politics the commission has to navigate to start antidumping and antisubsidy trade cases. That includes the current antisubsidy investigation into Chinese electric vehicle imports, even though that was started by the trade directorate on its own initiative without a public complaint by a company or member state.It’s still very early days, but foreign subsidies investigations are already showing they can be quick to deploy and are well-equipped with powers of scrutiny. It’s notable that GROW is investigating two Chinese solar companies while the commission has decided for the moment not to bring trade defence cases against imports of solar kit from China. Especially in industries where foreign direct investment can be as important as cross-border trade, the FSR is labelled ONE TO WATCH in very large letters.A council of despairOne process that’s barely worth watching, if indeed it survives, is the EU-US Trade and Technology Council (TTC). The council first met in September 2021 in Pittsburgh and had its latest (and perhaps final) meeting last week in the fine Belgian city of Leuven. Attendees had the standard tour of the semiconductor research facility of IMEC there, which, to be fair, does incredible stuff that seemed to me to be little short of sorcery when I visited.Sorry to say, but the TTC is a classic example of creating a bureaucratic structure in lieu of an actual willingness to co-operate. It’s good that counterparts in Washington and Brussels talk to each other, but it’s not at all clear it needs a multistranded meeting infrastructure to do it. My Brussels colleagues quoted an EU diplomat as saying that the “trade part is dead and the technology part is dying”: harsh but fair.When anything big and controversial needed fixing, such as the US green steel club or the infamous local-content provisions in the Inflation Reduction Act electric vehicle tax credits, it was dealt with separately outside the TTC. Last week we got the usual kind of stuff: a critical minerals club, an agreement on sharing data on semiconductor market distortion and so on, without binding mechanisms to make anything happen.I often say I don’t like saying “I told you so” but that’s obviously a lie — I live for saying it. And in a Trade Secrets almost exactly two years ago I did, in fact, tell you so. Semiconductors are a tough test of the ability of industrial policy to target interventions precisely, given the blindingly complex globalised supply chain involving multiple stages of R&D, production and distribution. In the light of global semiconductor shortages (potentially worsened by the Ukraine war), the EU and US are each passing a Chips Act to secure supply. Supposedly they and the other big rich-world semiconductor producers (Taiwan, South Korea, Japan) will try to co-ordinate their interventions so they don’t end up doing the same thing. I’m — guess what? — sceptical this will happen. The co-operation mechanisms in the EU’s and US’s plans are pretty feeble and the Trade and Technology Council that Washington and Brussels have just set up to talk to each other on these matters doesn’t really have enough power.EU-US co-operation on green tech and trade issues is at a pretty low ebb. It’s not the TTC’s fault as such — there’s just no real appetite for forging a common position. Things might improve after the US election unless Donald Trump wins, in which case transatlantic relations blow up anyway.Charted watersAdd another example to the teetering pile of crises that weren’t: the rise in global food prices after Russia’s invasion of Ukraine in 2022. Some thought this would turn into a proper global calamity with spreading export restrictions and widespread shortages and so on. It wasn’t much fun for food-importing countries at the time, but (helped by some lucky timing of good harvests, it has to be said) prices have come down and fears of widespread hunger crises have dissipated. Score another point for the resilience of globalisation.Trade linksMy FT colleague Martin Sandbu takes aim at the common idea that Chinese overcapacity in green tech is a bad thing.Conversely, US Treasury secretary Janet Yellen sounds a lot cooler on China’s role in the world economy than she used to.The economist Nouriel Roubini on how this year’s China Development Forum discussion meeting was focused on China avoiding the “middle-income trap”.Incredible to relate, but the UK economy’s adjustment to Brexit is being hampered by bad government, in this case new import charges that are likely to deter food trade with the EU. Similarly, some beleaguered farmers struggling to adjust to the post-Brexit subsidy system are asking for a basic income for the agricultural sector.Zimbabwe is looking to replace its basket-case fiat currency with one backed by gold, which will go about as well as you’d expect.Recommended newsletters for youBritain after Brexit — Keep up to date with the latest developments as the UK economy adjusts to life outside the EU. Sign up hereFree Lunch — Your guide to the global economic policy debate. Sign up here More
