Europe's struggling economy faces another challenge as the International Monetary Fund (IMF) warns of a potential subsidy race between the US and China. The IMF cautions that the competition between the two superpowers to provide subsidies to their domestic industries could lead to distortions in global trade and investment flows, ultimately harming Europe's already ailing economy. The IMF urges European policymakers to take action to protect their economies and ensure fair competition [2a9b1b6c].
This warning comes at a time when Europe is still dealing with the economic fallout from the COVID-19 pandemic. The pandemic has had a significant impact on Europe's economy, causing disruptions in various sectors and leading to stagnant GDP growth. Europe's GDP growth has been only 4% this decade, compared to 8% in America. The combination of the pandemic's effects and the potential subsidy race between the US and China adds to the challenges Europe faces in its efforts to strengthen its economic security [6fe33905].
The IMF's warning highlights the need for European policymakers to prioritize protecting their economies and ensuring fair competition. Europe must avoid getting caught in a subsidy race that could further harm its struggling economy. Instead, policymakers should focus on implementing measures that support growth, such as cutting interest rates, investing in infrastructure and research, reforming regulation, and signing trade deals. By doing so, Europe can navigate the challenges it faces and enhance its economic security [2a9b1b6c] [6fe33905].
Airbus CEO Guillaume Faury recently criticized the United States as the main cause of global trade tensions, but a new analysis from ITIF argues that China is the real threat to global trade policies and norms. While the Trump administration imposed a 10 percent tariff on European commercial aircraft in 2019, the subsidies that Airbus has received from European governments have been much larger. These subsidies have consistently violated WTO rules and have cost Boeing significant market share. Airbus continues to receive financial support from European governments. However, the true challenge to Airbus comes from China's state-owned national champion, COMAC. China has provided massive government subsidies to COMAC, allowing it to sell products below production costs. COMAC aims to replace Boeing and Airbus as the leading supplier of single-aisle planes. The analysis argues that the EU and the United States should collaborate to push back against China's economic predation and protect the global innovation economy [7a3e3eb4].