Where Should Turkey Stand as the EU Sinks Against China?
Where Should Turkey Stand as the EU Sinks Against China?
Last weekend, European Commission President Ursula von der Leyen and European Central Bank President Christine Lagarde published a letter of regret in the Financial Times. In summary, they admitted: “We are aware of how bureaucratic we have made Europe. We are pressing the reset button to become competitive again.”
Simultaneously, Brussels announced a plan aligned with this objective. The European Union seems to be attempting to implement steps in line with the Draghi Report, which I discussed here in September. But where will these steps lead?
On the same weekend, this article was published in the Financial Times, and specific provisions of the EU’s Artificial Intelligence Act took effect. Only 5% of global AI investments are allocated to the EU, while nearly all AI advancements and innovations come from the U.S. and China. Nevertheless, Brussels believes that the legitimate authority sets the rules in this arena. Isn’t that intriguing?
I argue it’s not merely fascinating but also concerning. For instance, Apple decided not to introduce AI-powered features in its new iPhone 16 in the EU due to potential regulatory issues stemming from European competition laws. As a result of these regulations, Europe risks falling behind in technology production and adoption.
Moving on to the manufacturing sector — when China’s production of textile goods, washing machines, and televisions began to accelerate in the 2000s, it could not compete with European manufacturers producing high-value-added goods. Europe even embraced China’s economic rise, as newly wealthy Chinese consumers eagerly purchased luxury cars made in Germany.
However, the past decade has transformed the landscape. China is now manufacturing high-tech products on an unprecedented scale. Since the pre-COVID-19 period, Germany’s automotive exports have dropped by 25%, while China — once a net importer of vehicles — now exports five million net cars annually. This shift is occurring because instead of implementing protective measures against China’s industry, the EU has kept its industrial sector tied up with excessive bureaucratic obligations. I previously wrote about how China has dominated the global battery and solar panel production market, leading to the decline of Europe’s flagship energy company, Northvolt.
The core problem of the European Union is its attempt to balance multiple conflicting priorities within its policymaking. Trying to save the world from climate change, ensure high wages for workers, and remain competitive all at once leads to achieving none. For example, according to a Financial Times report on January 17, European automakers have had to pay Chinese electric vehicle manufacturers billions to offset their carbon emissions from internal combustion engine production. This contradiction raises a fundamental question: What is the policy direction here?
Moreover, in Germany, labor unions hold significant representation on the boards of industrial firms, making it nearly impossible for companies to restructure and modernize their production facilities on time. As a result, Europe is losing its economic agility. It is also worth noting that major European manufacturers like Renault and Volkswagen are largely state-controlled, with the French government and various German states acting as their principal shareholders — essentially making them publicly owned enterprises.
The EU Will Impose Complicated Protectionist Rules
So, what is the EU likely to do? I believe they will follow Trump’s example and raise tariff barriers. They will introduce convoluted regulations imposing “Buy European” obligations. Many of these will be disguised under environmental concerns. For instance, in my October 11, 2024 article, I discussed a planned EU regulation that would negatively impact Turkey’s plastic recycling industry. Due to the political and economic dynamics I described earlier, the EU cannot reduce bureaucracy or unnecessary regulations — if anything, they will likely increase them.
What should the EU do? If I were in their position, I would recognize Turkey, a country within the Customs Union eager to align with Europe’s every move and harness its industrial dynamism. I would establish a European Manufacturing Policy akin to the EU’s Common Security and Defense Policy and integrate Turkey into this framework. However, just as Europe lacks a strategic vision in defense policy, it appears to suffer from similar short-sightedness in industrial policy.
Turkey Should Avoid Premature and Unnecessary Regulations
So, what should Turkey do? While writing this article, I learned that Turkey plans to align its AI regulations with the EU’s. The biggest mistake Turkey could make is to tighten its rules in areas where the EU has not explicitly required them.
For instance, the Carbon Border Tax is forcing us to enact climate legislation — we must implement a climate law. However, we must not rush into regulation in AI and many other areas. We should avoid imposing premature and unnecessary restrictions and even work to remove existing burdens.
Let Europe keep itself busy with excessive paperwork.
As we say in Turkey, ‘Let them spin their own wheels while we hit the road.’” We should focus on enhancing its competitiveness.
This article is a translated version of “AB, Çin karşısında batarken biz nerede durmalıyız?”which was initially published in Economic Daily (Nasıl Bir Ekonomi Gazetesi) in Economic Daily on February 07 ,2025.
