Origin of the EU-level Industrial Policy: Nationalism or Destructive Innovation against China? 

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Abstract:

February 2019 has been a watershed of the EU industrial policy because of “Franco-German Manifesto for a European Industrial Policy” and then the EU Framework for FDI Screening. This paper reviews relevant theories, history of the EU-level industrial policy and the recent comments on the above new activities. We indicate “destructive innovation” rather than conventional industrial theory has a great impact on the EU member states’ decisions. That is, a strategy combining the new technologies and components improves price-performance ratio to compete or even catch up with the products by the advanced economies. In addition to the comments of nationalism, the EU DG Competition also criticizes that the Franco-German proposal violates the policy tradition. However, the new EU-level industrial policy would be beyond the simple cost-benefit consideration if the WTO reform, EU-US relations, and EU-China bilateral negotiations are not successful in the next few years. Keywords: EU industrial policy, China’s industrial policy, destructive innovation, competition policy, FDI screening mechanism