For the past decade, western governments have wrestled with how to respond to the threat of cheap Chinese imports. The issue of “predatory competition” was once again high on the agenda at this week’s G7 summit in Evian-les-Bains, and is set to feature prominently when EU leaders meet on Thursday. Increasingly, the response from Washington and Brussels has been to leverage the might of the state to provide subsidies and protections for industry. According to Global Trade Alert, more than 9,500 subsidy measures have been introduced across the EU and US over the past ten years. In other words, to counter Beijing’s state-led economic model, the rich world has increasingly borrowed elements of it.Today, there is growing acceptance in the west that the state should play a greater role in the economy, despite the costs and distortions this may bring. Recent shocks, from Covid-19 to conflicts in Ukraine and the Middle East, have exposed the fragility of global supply chains when left to markets alone. Rising geopolitical tensions have also highlighted how dependencies can be weaponised, while years of reliance on low-cost Chinese imports have eroded domestic manufacturing capacity in sectors deemed critical to national security and emerging technologies. Few now dispute that interventions — be they subsidies, procurement rules or trade protections — can help build resilience in strategic industries.
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