A Japan-style game plan to save Europe’s auto industry?

Deals struck with Japanese carmakers in the 1970s and 80s have been increasingly pointed to as a role model. Going down that route, however, could further dent the EU's perceived commitment to free trade – and sorely backfire.

The topic of heightened competition and trade tensions with China has been all the rage over the past year, both in Brussels' EU boardrooms and across capitals fearing for the fate of their domestic industries.

in September 2023, German Social Democrat Chancellor Olaf Scholz said "competition should spur us on, not scare us," speaking at the automotive trade fair in Munich.

This was one week before European Commission President Ursula von der Leyen – a German Christian Democrat – announced an investigation into Chinese carmakers, arguing that fair competition was distorted by state subsidies in China. Famously, the investigation has led to new tariffs on Chinese electric cars, a move that Scholz has always rejected.

But with the ongoing troubles in European car manufacturing – 88,000 job losses announced last year alone – Scholz’s own voter base is calling for a tougher stance on China.

“There must be a mandatory proportion of European components for all industrial products that are marketed in Europe,” Jürgen Kerner, supervisory board member at IG Metall, Germany’s largest trade union, said this week.

Given the German industry’s dependence on exports and free trade, IG Metall’s call for a “European local-content strategy” resembling the “Buy American” or “Buy China” policies of other blocs, is considered “historic” by other trade unionists.

Bernd Lange, head of the European Parliament’s trade committee – another German Social Democrat and IG Metall member – has weighed in on the debate, drawing a historical comparison with deals that were negotiated with Japan over four decades ago.
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