Europe has been talking about strategic autonomy for years now, but in reality, foreign governments can shut down European factories with a stroke of the pen. Companies don’t wait for policy, but for raw materials, chips and access to markets. According to Member of the European Parliament Bart Groothuis (VVD), Europe still has the wrong idea about its own dependencies. ‘If we want to remain relevant, we must dare to choose.’
-‘You must become relevant to the rest of the world’.
– Europe is still over 90 percent dependent on China for many critical materials.
– Groothuis advocates demand politics: creating sovereign demand through the European domestic market.
– ‘If Europe doesn’t make stupid financial decisions, and upholds the rule of law, then this is the most beautiful continent.’
Member of the European Parliament Bart Groothuis on strategic indispensability
European strategic autonomy. Bart Groothuis, Member of the European Parliament for the VVD, thinks that is the wrong term. It suggests closure and complacency, which he believes is the wrong response to a world in which power, trade and technology are increasingly clashing. ‘What you have to do is become relevant to the rest of the world’, he says. ‘It’s about strategic indispensability: having unique goods and technologies, which means parties simply have to come to you.’ According to Groothuis, this is the condition for economic security and prosperity. And in his view, that is the most important response to the gloomy reports from Mario Draghi and Enrico Letta, who warn Europe against loss of competitiveness and administrative paralysis.
Groothuis sees this lack of keenness every day in dealings with China, for example. ‘In Europe we’ve never properly identified the critical links in the value chain’, he believes. ‘But now they’re being used as weapons against us.’ Groothuis points to the recent restrictions on rare earth metals. According to him, last summer, about five hundred European companies came to a standstill because China demanded a licence for every bit of those raw materials. ‘Even if a Dutch company trades with a German company, and there’s only one percent rare earth metal in it, the Chinese Communist Party must give permission.’ And it doesn’t stop there. ‘They also want to know what it’s used for, how much you need, for which market, which part, and drawings included. They want everything.’ According to Groothuis, that constitutes premeditation. ‘This way, they not only gain business intelligence from the competition, but they can also squeeze us more effectively later. For example, if Taiwan is taken’, he points out.
Japan as a reference point
Groothuis takes that Chinese threat very seriously: ‘It has my utmost attention. If it gets out of hand there, it’ll have immediate major consequences for Europe, because almost everything comes from China. So how many months of chemo do we have left? And how much penicillin, how much antibiotics? And if you are in manufacturing: how many of your critical parts do you have in stock that have to come from China? The Member of the European Parliament has submitted this issue to the Defence Committee, the Trade Committee and the Industry Committee in Brussels. ‘I want the scenarios to be worked out, also to make them public. Because then we can reason backwards: how do we prevent this? Do we need to start building up stocks? Should we bring back industry? Do we have to diversify? Or conclude new trade agreements?’
He finds it incomprehensible that Europe is late in doing this. ‘Think back to 2010, when China squeezed Japan over a conflict over the Senkaku Islands. The Japanese manufacturing industry was in a state of disarray.’ Japan learned lessons from this. ‘They’ve gone from an 80 percent reliance on rare earths down to just over 50 percent. And it’s still decreasing.’ According to Groothuis, Europe is still over 90 percent dependent on China for many critical materials. ‘We’re not doing it right.’ The counterargument he often hears from Western decision-makers in industry is that China would harm itself economically by halting the sale of its raw materials. ‘It wouldn’t be in China’s interest, even economic suicide.’ Groothuis shakes his head. ‘But you shouldn’t look at the country like that. Take a dictator seriously when he says what he wants.’
‘Take a dictator seriously when he says what he wants’
Japan serves as a point of reference for Groothuis. He has been talking to Japanese policymakers and companies for years. ‘Broadly speaking, they rely on three pillars to reduce their dependencies: their own mines, circularity and global diversification.’ But for him, indispensability goes further than just raw materials. He mentions the Japanese initiative to build the solar panels of the future, with perovskite. Although Draghi advises to consider this sector as lost in Europe, in Japan, they draw the opposite conclusion: because it does not require critical raw materials and the technological possibilities are considerable, the Japanese are investing 1.5 billion euros. Or look at Rapidus, an advanced semiconductor factory. ‘That too is a huge investment. Whether it’ll work remains to be seen, but the way of thinking is interesting.’ It is a direction that runs counter to the European tendency to invest only if there is already a solid business case. ‘However, Japan says: we invest now so that in ten, fifteen years the world will be dependent on us. That’s the right idea.’
First overview
It’s not about doing everything yourself, Groothuis emphasises again. ‘It’s about the chokepoints, the places where you can be cut off.’ As an island, Japan feels that instinctively, he says. ‘That does something to your political mind.’ In Europe, that feeling is often still lacking. Yet he sees plenty of opportunities, in photonics, for example. The only question is how to capitalise on those opportunities without becoming fragmented. ‘Because you can’t control all the links in a chain. That’s not smart.’
In his answer, he draws inspiration from his time at the Ministry of Defence, where he was head of the cybersecurity office. ‘I learned from generals: if you have a big problem, you have to go from overview to insight to action. So, it starts with an inventory. What indispensable materials and technologies do we already have? Sabine Weyand, Director-General for Trade at the European Commission, recently said that we should start doing this. Of course, I said that five years ago!’
28th regime
This is followed by insight: what do we want to develop further in Europe, and with which instruments. Groothuis also sees challenges there: ‘Deep tech – where you can make a difference – almost by definition has no market yet; after all, that lies in the future. But our financial instruments such as the IPCEI ask: what are you going to earn, what is the competition like?’ It takes two years for a company to get through that bureaucratic mill. ‘But two years is four generations of ChatGPT. If we want to invest in future earning capacity, this also requires a different set of financial instruments that think in terms of future markets.’
In this respect, Europe structurally lags behind the United States. There is plenty of technology available, Groothuis notes. ‘The problem is scaling up. You can easily get two or three hundred million here. But if more than a billion is needed, you have to work with American parties. One in three European unicorns therefore moves to America. In theory, Europe has the money, but it is fragmented among wealthy families, held in German savings accounts or in risk-averse pension funds. A Greek billionaire will also think twice before investing in an Amsterdam start-up, because bankruptcy law is not the same.’ That is why Groothuis is a strong supporter of the establishment of the Capital Markets Union and the so-called 28th regime, a European initiative to harmonise rules regarding business operations and law. ‘Very boring, but it’s the core of what we need to do.’
Demand politics
According to Groothuis, the government can achieve breakthroughs by acting as the first customer or investor. ‘All of Elon Musk’s companies started in the government. And in the first eight years of ASML, more than half of the capital came from Brussels and The Hague. The government should not dictate what is or isn’t invested in; a guided economy does not work in Europe. But it must create the conditions that allow companies to flourish. When you talk about the truly significant earning potential, the new ASMLs and the new links in the value chain where Europe can be unique, they need an extra boost.’
‘We must want to win’
The weak spot is on the demand side. That is why Groothuis advocates what he calls demand politics. ‘You have to use your own domestic market.’ In sectors such as cloud and semiconductors, the government can create sovereign demand. ‘If you want advanced chips to be produced here, you must[ show that there’s demand. This can be done, for example, by obliging governments and vital sectors to use European cloud solutions. When this results in demand for several hundred thousand wafers, Europe becomes attractive for major chip manufacturers to set up a factory here.’
He extends this reasoning to AI and digital infrastructure. He speaks of digital colonisation if Europe lags behind in training large language models or scaling up AI developed in Europe. ‘If advanced AI chips from Nvidia are only available to American companies in Europe, then Europe is structurally lagging behind.’ However, that premise was the basis for Joe Biden’s AI Diffusion Act, which was later withdrawn by Donald Trump. ‘I was really shocked by that Act because it would’ve made Europe totally dependent on American AI chips and AI models. Put down a European request, design and make your own advanced chips, otherwise you’ll become a colony of the US.’
Playing hardball
Groothuis sees the same need for tougher choices when it comes to raw materials. According to him, the Critical Raw Materials Act is a step in the right direction, but not a solution in itself. ‘It takes twelve to sixteen years to open a European mine and set up the necessary refinery’, he explains. ‘Recycling offers opportunities, but this currently mainly happens in China. Lithium from European batteries is mainly processed there. How is that possible?’ Groothuis again points to the United States, and President Trump. ‘The greatest success in terms of resource dominance comes from him. With the Pentagon as a regular customer, price floors, and trade measures, he has created a long-term business case for American mining of magnet raw materials. That’s playing hardball. And that’s what I miss in Europe.’ Subsidies without a price floor or off-take agreements are wasted money. Because they leak out to China or the US.’
Most beautiful continent
Yet pessimism does not prevail in Groothuis’s view. According to him, Draghi and Letta’s warnings have had an effect: ‘The urgency has landed.’ He points out the vulnerabilities of others: Russia selling its gold, China with its depressed demographics and real estate bubble, America where governance and the rule of law are under pressure. ‘If Europe invests in defence, stays out of war, doesn’t make stupid financial decisions, and upholds the rule of law, then this is the most beautiful continent to live and work.’ He believes in technology, in human capital and in the potential of the internal market. ‘If the Japanese, Americans or Chinese really need something new, they look to Europe’, Groothuis says, but he immediately adds: ‘There is a lot of work to be done. We must want to win. And I haven’t heard that enough.’
europa.vvd.nl
CAPTION 1:
Bart Groothuis (VVD): ‘If we invest in the right new technologies now, the world will soon be dependent on us.’ Photos: VVD
CAPTION 2:
‘In Europe, we’ve never properly identified the critical links in the value chain.’
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‘Take a dictator seriously when he says what he wants’
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