Supply Lines: Europe’s about to get more protectionist

Supply Lines

The long, stale and jargon-filled communiques that come out of the marathon European Union summits in Brussels are not an easy read. Intentional or not, the prose is a barrier obscuring what the leaders of what is effectively the world's third-biggest economy are up to. Investors and the common folk alike usually ignore them. They shouldn't.

A chunk of next week's summit deliberations will be dedicated to industrial policy, and the draft of the joint statement points to the direction of things in the years ahead. The central themes are "autonomy" and "sovereignty," two terms repeated throughout the text.

Leaders will single out achieving "strategic autonomy" as a key objective of the union, according to the drafts seen by Bloomberg. But what does it mean for trade policy?

They will vow to repatriate production of certain products such as medical equipment, microprocessors and secure telecommunication networks, and maintain control of key technologies, including micro-electronics, by using "EU and national funds," if necessary. They will invite legislative measures to reduce "strategic dependencies" in "sensitive industrial ecosystems" such as health.

Restrictions on public subsidies will be eased by "updating" the EU's state-aid rules. At the same time, the EU will adopt punitive measures limiting access to the European market for subsidized competitors outside the region.

For a bloc that prides itself as the most ardent advocate of laissez-faire global trade, the references to state support for local companies and the explicit promise to reduce dependency on complex supply chains show the pendulum has swung to a different direction.

Summit communiques give political direction to the EU's rule-making machine. Expect legislation to follow in the months ahead — from levying imports from polluters outside the bloc, to a renewed push to tax U.S.-based tech giants. Public funding for European champions to "overcome market failures and enable breakthrough innovation" will become available through the commonly financed recovery fund.

A few months ago, it may have been easy to dismiss all these points as aloof ideas by French President Emmanuel Macron that enjoyed Germany's lukewarm support. But after the Oct. 1-2 summit, there will be little doubt that all 27 nations are on board. There will be tussles over the details, but the direction is clear: a more protectionist and more assertive EU is emerging.

Nikos Chrysoloras in Brussels

Charted Territory

Warehouse deals accounted for a record share of global commercial real estate investment in the first half of the year as the surge in e-commerce during lockdown fueled demand for logistics properties. About $75 billion was spent on industrial and logistics properties in the first six months, or about 20% of total investment, according to broker Savills. Warehouses surpassed stores to become the third-most-popular real estate asset class after offices and homes, the firm said in a report based on Real Capital Analytics data.

Today's Must Reads

  • Get in line | The U.K. government is warning of 7,000 truck-long queues in Kent in a "reasonable worst-case" scenario due to Brexit, a stark assessment of the potential chaos when Britain leaves the EU's single market. Meanwhile, the EU stepped up its attack on Boris Johnson's attempt to unpick the Brexit divorce deal, warning that the bloc won't cave into pressure as negotiations over a trade accord reach a critical final few weeks.
  • Some more equal | As Republicans and Democrats in Washington try to settle a high-stakes dispute over agriculture aid, a study shows the bulk of billions of dollars in U.S. subsidies going to the country's biggest and richest farms.
  • Huawei defense | Huawei, the telecom giant at the center of U.S.-China tensions, said it has "sufficient" inventory for its communications equipment business while it seeks out supplies of smartphone chips that have been cut off by a Trump administration ban.
  • No bueno | The EU's trade deal with the Mercosur countries won't be ratified until progress is done on climate change, deforestation and food safety standards, a French official said.
  • Press pause | Bad news for America's press-the-flesh salespeople: Most big-business conventions are on hold until late summer or fall of next year.
  • Taking swipes | The pandemic must serve as an "electric shock" that wakes up the United Nations, French President Emmanuel Macron said in a speech that included veiled attacks on the U.S. and China.
  • Funding coup | South African poultry producers have invested more than half of the funds they committed as part of a so-called master plan to grow the industry as the government earlier this year raised tariffs to counter cheap imports.

On the Bloomberg Terminal

  • Strong dose | GoodRx's profitability dwarfs that of peers across the health-care supply chain, Bloomberg Intelligence says.
  • Shipping solutions | Maersk changed its mind on scrubbers and will use the exhaust-cleaning systems on some vessels, Bloomberg Intelligence writes.
  • Fewer tariffs... | A number of U.S. manufacturers are appealing a decision lowering or eliminating U.S. antidumping duties on imports of steel pipe from Turkey.
  • ... more tariffs | U.S. producers are appealing a ruling that removed antidumping duties on certain imports of cold-drawn steel mechanical tubing from India, arguing the trade court was too lenient to an Indian producer who submitted inaccurate data.
  • Use the AHOY function to track global commodities trade flows.
  • Click HERE for automated stories about supply chains.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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