The expression is not new, but it has re-emerged since the pandemic alongside a new prudentialism, protectionism and nationalism, and has impinged on imports, investments and even vaccines against COVID-19. Trump’s ‘America First’ (backed by a host of decrees and executive orders) has been replaced by Biden’s ‘Buy American’, a more moderate version of the slogan and policy. Biden has excluded foreign companies from certain federal government purchases in the US, a backward step viewed with no little resentment by Europe and Canada, which have been hoping for transatlantic opportunities in this area for some time, based on open reciprocity. The goal of the policy? To stimulate local manufacturing (despite the fact that it is increasingly automated), including the transport of goods within the US. Indeed, the Democratic candidate Elizabeth Warren had already unveiled her ‘Plan for Economic Patriotism’ during her campaign in the primaries. Biden’s policy may raise the price of the purchases he seeks to defend and reduce competitiveness. It is an inauspicious first step from the new Administration in the trade arena, even though in many respects it is rectifying Trump’s international policy.
But, after years of turning a blind eye, if not active encouragement, the EU and its member states have also shored up their defences to restrict the acquisition of weakened companies by non-European capital, especially, although not exclusively, by China. Left and right often agree when it comes to this assertion of sovereignty. Where will this economic patriotism lead? It is too early to say, and it depends on whether it will persist when the recovery comes. It should be remembered that the Buy American Act dates back to 1933, signed by the then president Herbert Hoover on his last day in the White House (just before Franklin D. Roosevelt moved in). It was the outcome of an economic approach that aggravated the Great Depression of 1929, whereas the current one is the outcome of the global pandemic.
This type of policy pursues two essential goals: to boost employment among the working and middle classes (as Biden endlessly reiterated during the campaign and following his victory and installation in the White House). For the time being he makes no mention of restoring US membership of the Trans-Pacific Partnership (TPP), negotiated by Obama and abandoned by Trump. And without the US, but with China, 15 Asian-Pacific countries signed the Regional Comprehensive Economic Partnership last November.
In the EU, trade issues are handled by Brussels, but this does not apply to warding off unwanted investors. Macron’s government has blocked the purchase of the Carrefour hypermarkets group by the Canadian Couche-Tard corporation, and won almost unanimous support from all parts of the political spectrum for its defence of economic sovereignty. This marks a change from when Macron was the Economy Minister and the early days of his presidency, when he sanctioned the sale of such strategic companies as the energy arm of Alstom. Although at the same time Macron continues looking for foreign investors in France.
The idea of European sovereignty or autonomy has also received a boost. With the pandemic, for instance, Europeans have realised their enormous dependence on Chinese and Indian supply chains. Even before COVID-19, the German and European approach changed when the Chinese company Midea bought the German firm Kuka, a leading robotics company, in 2014. With the crisis unleashed by the pandemic, European and national statutes designed to ward off non-EU investments in strategic businesses have been tightened up.
The EU succeeded in centralising the purchase of COVID-19 vaccines, avoiding an ‘every-man-for-himself’ scramble. But in the light of what has transpired, not only did Brussels mishandle negotiations with AstraZeneca, it has also been on the brink of succumbing to ‘vaccine protectionism’, highly influenced by Germany, which engineered approval of the ban on exporting such vaccines outside the EU. Vaccine patriotism? Starting at home is understandable, but this does not remove the fact that the pandemic will not be overcome without authentically global cooperation.
There is also technological patriotism, evident not exclusively, but particularly, in the steps taken against China, with the implicit risk of decoupling. Thus, a report jointly issued by the European Union Chamber of Commerce in China and the Merics consultancy warns: ‘As the world moves towards increasing techno-nationalism, the possibility of complete digital disintegration requires sober analysis as well as a responsible counter-vision for global integration’. And this comes in spite of the Comprehensive Agreement on Investment between China and the EU, which favours both but does not lessen such patriotism on either side (China retains major parts of its economy outside the reach of foreign investment). In the EU, France and Germany especially are on the alert for direct and indirect investments from China and elsewhere.
Spain is not immune from this type of thinking. Thus, the government is weighing whether to authorise the partial take-over of Naturgy, one of the three large electrical utility companies in Spain, by the Australian IFM investment fund. And there are other investments that can also be characterised as strategic, for example in news media that are important to domestic democratic life and the international image of the country. It is not that it matters a great deal in itself if everyone plays by the rules, and the independence of the media is respected. The Financial Times, the most global and European newspaper (Brexit notwithstanding) passed some time ago from British to Japanese ownership (Nikkei), but has apparently emerged unaffected in terms of its quality and independence. But it is a strategic matter.
Economic patriotism needs to be treated with caution. It makes sense at certain times and in certain sectors. Countries have to defend their strategic businesses from acquisitions from outside the EU at times of weakness. But it could lead to greater protectionism. Although Trump is no longer in the White House, part of his message has taken root in the US and infected a large part of the world.