Yanmei Xie is senior associate fellow at the Mercator Institute for China Studies. After Canadian Prime Minister Mark Carney spoke at Davos last week, a whole continent contracted leadership envy. Calling the rules-based order — which Washington proselytized for decades before stomping on — a mirage, Carney gave his country’s neighboring hegemonic bully a rhetorical middle finger, and Europeans promptly swooned. But before the bloc’s politicians rush to emulate him, it may be worth cooling the Carney fever. Appearing both steely and smooth in his Davos speech, Carney warned middle powers that “when we only negotiate bilaterally with a hegemon, we negotiate from weakness.” Perhaps this was in reference to the crass daily coercion Canada has been enduring from the U.S. administration. But perhaps he was talking about the subtler asymmetry he experienced just days before in Beijing. In contrast to his defiance in Switzerland, Carney was ingratiating during his China visit. He signed Canada up for a “new strategic partnership” in preparation for an emerging “new world order,” and lauded Chinese leader Xi Jinping as a fellow defender of multilateralism. The visit also produced a cars-for-canola deal, which will see Canada slash tariffs on Chinese electric vehicles from 100 percent to 6.1 percent, and lift the import cap to 49,000 cars per year. In return, China will cut duties on Canadian canola seeds from 84 percent to 15 percent. In time, Ottawa also expects Beijing will reduce tariffs on Canadian lobsters, crabs and peas later this year and purchase more Canadian oil and perhaps gas, too. The agreement to launch a Ministerial Energy Dialogue will surely pave the way for eventual deals. These productive exchanges eventually moved Carney to declare Beijing a “more predictable” trade partner than Washington. And who can blame him? He was simply stating the obvious — after all, China isn’t threatening Canada with annexation. But one is tempted to wonder if he would have needed to flatter quite so much in China if his country still possessed some of the world’s leading technologies. The truth is, Canada’s oil and gas industry probably shouldn’t really be holding its breath. Chinese officials typically offer serious consideration rather than outright rejection out of politeness — just ask Russia, which has spent decades in dialogue with Beijing over a pipeline meant to replace Europe as a natural gas market. The cars-for-canola deal also carries a certain irony: Canada is importing the very technology that makes fossil fuels obsolete. China is electrifying at dizzying speed, with the International Energy Agency projecting its oil consumption will peak as early as next year thanks to “extraordinary” electric vehicle sales. That means Beijing probably isn’t desperate for new foreign suppliers of hydrocarbons, and the ministerial dialogue will likely drag on inconclusively — albeit courteously — well into the future. This state of Sino-Canadian trade can be seen as classic comparative advantage at work: China is good at making things, and Canada has abundant primary commodities. But in the not-so-distant past, it was Canadian companies that were selling nuclear reactors, telecom equipment, aircraft and bullet trains to China. Yet today, many of these once globe-spanning Canadian high-tech manufacturers have either exited the scene or lead a much-reduced existence. Somewhere in this trading history lies a cautionary tale for Europe. Deindustrialization can have its own self-reinforcing momentum. As a country’s economic composition changes, so does its political economy. When producers of goods disappear, so does their political influence. And the center of lobbying gravity shifts toward downstream users and consumers who prefer readily available imports. Europe’s indigenous solar manufacturers have been driven to near extinction by much cheaper Chinese products | STR/AFP via Getty Images Europe already has its own version of this story: Its indigenous solar manufacturers have been driven to near extinction by much cheaper Chinese products over the span of two decades. Currently, its solar industry is dominated by installers and operators who favor cheap imports and oppose trade defense. Simply put, Carney’s cars-for-canola deal is a salve for Canadian consumers and commodity producers, but it’s also industrial policy in reverse. In overly simplified terms, industrial policy is about encouraging exports of finished products over raw materials and discouraging the opposite in order to build domestic value-added capacity and productivity. But while Canada can, perhaps, make do without industry — as Carney put it in Davos, his ambition is to run “an energy superpower” — Europe doesn’t have that option. Agri-food and extractive sectors aren’t enough to stand up the continent’s economy — even with the likes of tourism and luxury goods thrown in. China currently exports more than twice as much to the EU than it imports. In container terms, the imbalance widens to 4-to-1. Meanwhile, Goldman Sachs estimates Chinese exports will shave 0.2 percentage point or more of GDP growth in Germany, Spain and Italy each year through 2029. And according to the European Central Bank, cars, chemicals, electric equipment and machinery — sectors that form Europe’s industrial backbone — face the most severe job losses from China trade shock. Europe shares Canada’s plight in dealing with the U.S., which currently isn’t just an unreliable trade partner but also an ally turned imperialist. This is why Carney’s speech resonates. But U.S. protectionism has only made China’s mercantilism a more acute challenge for Europe, as the U.S. resists the bloc’s exports and Chinese goods keep pouring into Europe in greater quantities at lower prices. European leaders would be mistaken to look for trade relief in China as Carney does, and bargain away the continent’s industrial capacity in the process. Whether it’s to resist an expansionist Russia or an imperial U.S., Europe still needs to hold on to its manufacturing base.

BRUSSELS — The European Commission’s vice president Henna Virkkunen sounded the alarm about Europe’s dependence on foreign technology on Tuesday, saying “it’s very clear that Europe is having our independence moment.” “During the last year, everybody has really realized how important it is that we are not dependent on one country or one company when it comes to some very critical technologies,” she said at an event organized by POLITICO. “In these times … dependencies, they can be weaponized against us,” Virkkunen said. The intervention at the event — titled Europe’s race for digital leadership — comes at a particularly sensitive time in transatlantic relations, after U.S. President Donald Trump’s recent threats to take over Greenland forced European politicians to consider retaliation. Virkkunen declined to single out the United States as one of the partners that the EU must de-risk from. She pointed to the Covid-19 pandemic and Russia’s invasion of Ukraine as incidents that point to Europe’s “vulnerabilities.” She said the U.S. is a key partner, but also noted that “it’s very important for our competitiveness and for our security, that we have also our own capacity, that we are not dependent.” The Commission’s executive vice president for tech sovereignty swung behind the idea of using public contracts as a way to support the development of European technology companies and products. “We should use public procurement, of course, much more actively also to boost our own growing technologies in the European Union,” she said when asked about her stance on plans to “Buy European.” Those plans, being pushed by the French EU commissioner Stéphane Séjourné, in charge of European industy, to ensure that billions in procurement contracts flow to EU businesses, are due to be outlined in an upcoming Industrial Accelerator Act that has been delayed multiple times. “Public services, governments, municipalities, regions, also the European Commission, we are very big customers for ICT services,” Virkkunen said. “And we can also boost very much European innovations [and startups] when we are buying services.” Virkkunen is overseeing a package of legislation aimed at promoting tech sovereignty that is expected to come out this spring, including action on cloud and artificial intelligence, and microchips — industries in which Europe is behind global competitors. When asked where she saw the biggest need for Europe to break away from foreign reliance, the commissioner said that while it was difficult to pick only one area, “chips are very much a pre-condition for any other technologies.” “We are not able to design and manufacture very advanced chips. It’s very problematic for our technology customer. So I see that semiconductor chips, they are very much key for any other technologies,” she said.

LONDON — British ministers have been laying the ground for Keir Starmer’s handshake with Xi Jinping in Beijing this week ever since Labour came to power. In a series of behind-closed-door speeches in China and London, obtained by POLITICO, ministers have sought to persuade Chinese and British officials, academics and businesses that rebuilding the trade and investment relationship is essential — even as economic security threats loom. After a “Golden Era” in relations trumpeted by Tory Prime Minister David Cameron, Britain’s once-close ties to the Asian superpower began to unravel in the late 2010s. By 2019, Boris Johnson had frozen trade and investment talks after a Beijing-led crackdown on Hong Kong’s democracy movement. At Donald Trump’s insistence, Britain stripped Chinese telecoms giant Huawei from its telecoms infrastructure over security concerns. Starmer — who is expected to meet Xi on a high-stakes trip to Beijing this week — set out to revive an economic relationship that had hit the rocks. The extent of the reset undertaken by the PM’s cabinet is revealed in the series of speeches by ministers instrumental to his China policy over the past year, including Chancellor Rachel Reeves, then-Foreign Secretary David Lammy, Energy Secretary Ed Miliband, and former Indo-Pacific, investment, city and trade ministers. Months before security officials completed an audit of Britain’s exposure to Chinese interference last June, ministers were pushing for closer collaboration between the two nations on energy and financial systems, and the eight sectors of Labour’s industrial strategy. “Six of those eight sectors have national security implications,” said a senior industry representative, granted anonymity to speak freely about their interactions with government. “When you speak to [the trade department] they frame China as an opportunity. When you speak to the Foreign, Commonwealth and Development Office, it’s a national security risk.”  While Starmer’s reset with China isn’t misguided, “I think we’ve got to be much more hard headed about where we permit Chinese investment into the economy in the future,” said Labour MP Liam Byrne, chair of the House of Commons Business and Trade Committee. Lawmakers on his committee are “just not convinced that the investment strategy that is unfolding between the U.K. and China is strong enough for the future and increased coercion risks,” he said. As Trump’s tariffs bite, Beijing’s trade surplus is booming and “we’ve got to be realistic that China is likely to double down on its Made in China approach and target its export surplus at the U.K.,” Byrne said. China is the U.K.’s fifth-largest trade partner, and data to June of last year show U.K. exports to China dropping 10.4 percent year-on-year while imports rose 4.3 percent. “That’s got the real potential to flood our markets with goods that are full of Chinese subsidies, but it’s also got the potential to imperil key sectors of our economy, in particular the energy system,” Byrne warned. A U.K. government spokesperson said: “Since the election, the Government has been consistently transparent about our approach to China – which we are clear will be grounded in strength, clarity and sober realism. “We will cooperate where we can and challenge where we must, never compromising on our national security. We reject the old ‘hot and cold’ diplomacy that failed to protect our interests or support our growth.” While Zheng Zeguang’s speech was released online, the Foreign Office refused to provide Catherine West’s own address when requested at the time. | Jordan Pettitt/PA Images via Getty Images CATHERINE WEST, INDO-PACIFIC MINISTER, SEPTEMBER 2024 Starmer’s ministers began resetting relations in earnest on the evening of Sept. 25, 2024 at the luxury Peninsula Hotel in London’s Belgravia, where rooms go for £800 a night. Some 400 guests, including a combination of businesses, British government and Chinese embassy officials, gathered to celebrate the 75th anniversary of the People’s Republic of China — a milestone for Chinese Communist Party (CCP) rule. “I am honored to be invited to join your celebration this evening,” then Indo-Pacific Minister Catherine West told the room, kicking off her keynote following a speech by China’s ambassador to the U.K., Zheng Zeguang.  “Over the last 75 years, China’s growth has been exponential; in fields like infrastructure, technology and innovation which have reverberated across the globe,” West said, according to a Foreign Office briefing containing the speech obtained through freedom of information law. “Both our countries have seen the benefits of deepening our trade and economic ties.”  While London and Beijing won’t always see eye-to-eye, “the U.K. will cooperate with China where we can. We recognise we will also compete in other areas — and challenge where we need to,” West told the room, including 10 journalists from Chinese media, including Xinhua, CGTN and China Daily. While Zheng’s speech was released online, the Foreign Office refused to provide West’s own address when requested at the time. Freedom of information officers later provided a redacted briefing “to protect information that would be likely to prejudice relations.” DAVID LAMMY, FOREIGN SECRETARY, OCTOBER 2024 As foreign secretary, David Lammy made his first official overseas visit in the job with a two-day trip to Beijing and Shanghai. He met Chinese Foreign Minister Wang Yi in Beijing on Oct. 18, a few weeks before U.S. President Donald Trump’s re-election. Britain and China’s top diplomats discussed climate change, trade and global foreign policy challenges. “I met with Director Wang Yi yesterday and raised market access issues with him directly,” Lammy told a roundtable of British businesses at Shanghai’s Regent On The Bund hotel the following morning, noting that he hoped greater dialogue between the two nations would break down trade barriers. “At the same time, I remain committed to protecting the U.K.’s national security,” Lammy said. “In most sectors of the economy, China brings opportunities through trade and investment, and this is where continued collaboration is of great importance to me,” he told firms. Freedom of information officers redacted portions of Lammy’s speech so it wouldn’t “prejudice relations” with China.  Later that evening, the then-foreign secretary gave a speech at the Jean Nouvel-designed Pudong Museum of Art to 200 business, education, arts and culture representatives. China is “the world’s biggest emitter” of CO2, Lammy told them in his prepared remarks obtained by freedom of information law. “But also the world’s biggest producer of renewable energy. This is a prime example of why I was keen to visit China this week. And why this government is committed to a long-term, strategic approach to relations.” Shanghai continues “to play a key role in trade and investment links with the rest of the world as well,” he said, pointing to the “single biggest” ever British investment in China: INEOS Group’s $800 million plastics plant in Zhejiang. “We welcome Chinese investment for clear mutual benefit the other way too,” Lammy said. “This is particularly the case in clean energy, where we are both already offshore wind powerhouses and the costs of rolling out more clean energy are falling rapidly.” “We welcome Chinese investment for clear mutual benefit the other way too,” David Lammy said. | Adam Vaughan/EPA POPPY GUSTAFSSON, INVESTMENT MINISTER, NOVEMBER 2024 Just days after Starmer and President Xi met for the first time at the G20 that November, Poppy Gustafsson, then the British investment minister, told a U.K.-China trade event at a luxury hotel on Mayfair’s Park Lane that “we want to open the door to more investment in our banking and insurance industries.” The event, co-hosted by the Bank of China UK and attended by Chinese Ambassador Zheng Zeguang and 400 guests, including the U.K. heads of several major China business and financial institutions, is considered the “main forum for U.K.-China business discussion,” according to a briefing package prepared for Gustafsson. “We want to see more green initiatives like Red Rock Renewables who are unlocking hundreds of megawatts in new capacity at wind farms off the coast of Scotland — boosting this Government’s mission to become a clean energy superpower by 2030,” Gustafsson told attendees, pointing to the project owned by China’s State Development and Investment Group. The number one objective for her speech, officials instructed the minister, was to “affirm the importance of engaging with China on trade and investment and cooperating on shared multilateral interests.” And she was told to “welcome Chinese investment which supports U.K. growth and the domestic industry through increased exports and wider investment across the economy and in the Industrial Strategy priority sectors.” The Chinese government published a readout of Gustafsson and Zheng’s remarks. RACHEL REEVES, CHANCELLOR, JANUARY 2025 By Jan. 11 last year, Chancellor Rachel Reeves was in Beijing with British financial and professional services giants like Abrdn, Standard Chartered, KPMG, the London Stock Exchange, Barclays and Bank of England boss Andrew Bailey in tow. She was there to meet with China’s Vice-Premier He Lifeng to reopen one of the key financial and investment talks with Beijing Boris Johnson froze in 2019. Before Reeves and He sat down for the China-U.K. Economic and Financial Dialogue, Britain’s chancellor delivered an address alongside the vice-premier to kick off a parallel summit for British and Chinese financial services firms, according to an agenda for the summit shared with POLITICO. Reeves was also due to attend a dinner the evening of the EFD and then joined a business delegation travelling to Shanghai where she held a series of roundtables. Releasing any of her remarks from these events through freedom of information law “would be likely to prejudice” relations with China, the Treasury said. “It is crucial that HM Treasury does not compromise the U.K.’s interests in China.” Reeves’ visit to China paved the way for the revival of a long-dormant series of high-level talks to line up trade and investment wins, including the China-U.K. Energy Dialogue in March and U.K.-China Joint Economic and Trade Commission (JETCO) last September. EMMA REYNOLDS, CITY MINISTER, MARCH 2025 “Growth is the U.K. government’s number one mission. It is the foundation of everything else we hope to achieve in the years ahead. We recognise that China will play a very important part in this,” Starmer’s then-City Minister Emma Reynolds told the closed-door U.K.-China Business Forum in central London early last March. Reeves’ restart of trade and investment talks “agreed a series of commitments that will deliver £600 million for British businesses,” Reynolds told the gathering, which included Chinese electric vehicle firm BYD, HSBC, Standard Chartered, KPMG and others. This would be achieved by “enhancing links between our financial markets,” she said. “As the world’s most connected international financial center and home to world-leading financial services firms, the City of London is the gateway of choice for Chinese financial institutions looking to expand their global reach,” Reynolds said. Ed Miliband traveled to Beijing in mid-March for the first China-U.K. Energy Dialogue since 2019. | Tolga Akmen/EPA ED MILIBAND, ENERGY AND CLIMATE CHANGE SECRETARY, MARCH 2025 With Starmer’s Chinese reset in full swing, Energy Secretary Ed Miliband traveled to Beijing in mid-March for the first China-U.K. Energy Dialogue since 2019. Britain’s energy chief wouldn’t gloss over reports of human rights violations in China’s solar supply chain — on which the U.K. is deeply reliant for delivering its lofty renewables goals — when he met with China’s Vice Premier Ding Xuexiang, a British government official said at the time. “We maybe agree to disagree on some things,” they said. But the U.K. faces “a clean energy imperative,” Miliband told students and professors during a lecture at Beijing’s elite Tsinghua University, which counts Xi Jinping and former Chinese President Hu Jintao as alumni. “The demands of energy security, affordability and sustainability now all point in the same direction: investing in clean energy at speed and at scale,” Miliband said, stressing the need for deeper U.K.-China collaboration as the U.K. government reaches towards “delivering a clean power system by 2030.”  “In the eight months since our government came to office we have been speeding ahead on offshore wind, onshore wind, solar, nuclear, hydrogen and [Carbon Capture, Usage, and Storage],” Britain’s energy chief said. “Renewables are now the cheapest form of power to build and operate — and of course, much of this reflects technological developments driven by what is happening here in China.”  “The U.K. and China share a recognition of the urgency of acting on the climate crisis in our own countries and accelerating this transition around the world — and we must work together to do so,” Miliband said, in his remarks obtained through freedom of information law. DOUGLAS ALEXANDER, ECONOMIC SECURITY MINISTER, APRIL 2025 During a trip to China in April last year, then-Trade Minister Douglas Alexander met his counterpart to prepare to relaunch key trade and investment talks. The trip wasn’t publicized by the U.K. side. According to a Chinese government readout, the China-UK Joint Economic and Trade Commission would promote “cooperation in trade and investment, and industrial and supply chains” between Britain’s trade secretary and his Chinese equivalent. After meeting Vice Minister and Deputy China International Trade Representative Ling Ji, Minister Alexander gave a speech at China’s largest consumer goods expo near the country’s southernmost point on the island province of Hainan. Alexander extended his “sincere thanks” to China’s Ministry of Commerce and the Hainan Provincial Government “for inviting the U.K. to be the country of honour at this year’s expo.” “We must speak often and candidly about areas of cooperation and, yes, of contention too, where there are issues on which we disagree,” the trade policy and economic security minister said, according to a redacted copy of his speech obtained under freedom of information law. “We are seeing joint ventures and collaboration between Chinese and U.K. firms on a whole host of different areas … in renewable energy, in consumer goods, and in banking and finance,” Alexander later told some of the 27 globally renowned British retailers, including Wedgwood, in another speech during the U.K. pavilion opening ceremony. “We are optimistic about the potential for deeper trade and investment cooperation — about the benefits this will bring to the businesses showcasing here, and those operating throughout China’s expansive market.”

The Trump administration says it is barring former European Commissioner Thierry Breton and four other European nationals involved in curbing hate speech from U.S. soil as part of a sanctions package targeting what it describes as digital censorship. The sanctions, announced Tuesday, also revoke the U.S. visas of British citizens Imran Ahmed and Clare Melford, who respectively head the Centre for Countering Digital Hate and the Global Disinformation Index. Ahmed, who currently lives in Washington, faces immediate deportation, the Telegraph reported. Germany’s Anna-Lena von Hodenberg and Josephine Ballon, leaders of Hate Aid, a non-profit that tracks digital disinformation spread by far-right groups, are also subject to the visa bans. The move is the latest in a series of warning shots volleyed by the U.S. at allies over what it views as unfair efforts to regulate American social media and tech giants, including Elon Musk-owned X, which was slapped with a €120 million fine earlier this month for violating the bloc’s content moderation law. In a statement, U.S. Secretary of State Marco Rubio described the targets of the newly announced sanctions as “radical activists” who had worked to “coerce American platforms to censor, demonetize, and suppress American viewpoints.” Under Secretary of State for Public Diplomacy Sarah Rogers named the targets of the package in a thread posted on X in which she underscored the Trump Administration’s rejection of European efforts to crack down on hate speech. Rogers justified Breton’s visa ban by naming the French official, who served within European Commission President Ursula von der Leyen’s first administration, as the “mastermind” behind the bloc’s landmark Digital Services Act (DSA). That legislation has allowed the EU to level multimillion-euro fines on American tech giants like Apple and Meta for breaking digital antitrust rules, and to go after X for failing to curb disinformation. She also identified Britain’s Ahmed as a “key collaborator with the Biden Administration’s effort to weaponize the government against U.S. citizens,” and said Melford‘s Global Disinformation Index had used taxpayer money to “exhort censorship and blacklisting of American speech and press.” Rogers, who recently met with representatives of the German right-wing populist Alternative for Germany (AfD) in Washington, further named von Hodenberg and Ballon, both of Berlin-based non-profit Hate Aid, for allegedly censoring conservative speech. Breton responded to the sanctions with a post in which he asked if former U.S. Senator Joseph McCarthy’s anti-communist “witch hunt” was being revived, and pointed out that the DSA had been approved by the majority of lawmakers in the European Parliament and unanimously backed by the bloc’s 27 member countries. “Censorship isn’t where you think it is,” he wrote, questioning U.S. efforts to undermine the EU’s quest to reduce the spread of disinformation. European Commission Vice President for Industrial Strategy Stéphane Séjourné on Wednesday backed Breton in a post in which he said “no sanction will silence the sovereignty of the European peoples.” French Foreign Minister Jean-Noël Barrot condemned the visa restrictions and defended the DSA, which he said ensures “what is illegal offline is also illegal online.” The Trump administration is openly opposed to European attempts to regulate online platforms. Vice President JD Vance routinely rails against alleged attempts to use digital rules to censor free speech, and earlier this month said the EU should not be “attacking American companies over garbage.” Tech policy professionals say actions like Tuesday’s sanctions package, and the previous issuance of veiled threats at European companies accused of unfairly penalizing U.S. tech giants, may amount to a negotiating tactic on the part of a White House that wants to underscore its discontent with Europe’s regulations — without risking new trade wars that could threaten the U.S. economy.

LONDON — The U.K. will break China’s stranglehold over crucial net zero supply chains, Energy Minister Chris McDonald has pledged. McDonald, a joint minister at the Department for Energy Security and Net Zero and the Department for Business and Trade, told POLITICO he is determined to bolster domestic access to critical minerals. Critical minerals like lithium and copper are used in essential net-zero technologies such as electric vehicles and batteries, as well as defense assets like F35 fighter jets. China currently controls 90 percent of rare earth refining, according to a government critical minerals strategy published last week. McDonald said China’s dominance of mineral processing risks driving up prices for the net zero transition.  The U.K. has made a legally-binding pledge to reduce planet-damaging emissions to net zero by 2050. McDonald fears China has become a “monopoly provider” of critical minerals and that its dominant role in processing allowed China to control the costs for buyers. “We want to capture this supply chain in the U.K. as part of our industrial strategy. To do that … means, ultimately, we’re going to have to wrest control of critical minerals back into a broad group of countries, not just China,” he said. The government’s critical minerals strategy includes a target that no more than 60 percent of U.K. annual demand for critical minerals in aggregate is supplied by any one country by 2035 — including China. “So, if there is an investment from China that helps with that, then that’s great. And if it doesn’t help with that, or it sort of compounds that issue that isn’t consistent with our strategy, then we judge it on that basis ultimately,” McDonald said. Additional reporting by Graham Lanktree.

LONDON — In the corridors of Whitehall, armies of officials are working out how best to spend billions of pounds earmarked for defense equipment. However, they have yet to inform the people it concerns the most: Britain’s arms industry. Many in the sector now fear that they’ve wasted their own money developing cutting-edge gear, as the government drags its feet on awarding contracts. U.K. Prime Minister Keir Starmer’s Labour Party has made a lot of noise on defense since entering government last year, plundering the aid budget to get defense spending to reach 2.6 percent of GDP by 2027 and a promise of 3.5 percent by 2035.  Alongside the funding boost, Starmer asked George Robertson, a Labour Party politician who is a former NATO secretary-general, to lead a major inquiry into how the U.K. would meet geopolitical threats, known as the Strategic Defence Review (SDR). The SDR was well received across the defense industry and viewed as a statement of intent from the government to devote effort and resources to building up the sector, with an emphasis on resilience and innovation.  Those good intentions were supposed to be followed by a series of complementary announcements — including a defense industrial strategy, the appointment of a new national armaments director, and a defense investment plan.  The industrial strategy and armaments director both arrived late, while the defense investment plan is still missing in action. It is now expected after this week’s fall budget.  Six months since the SDR, many in the industry complain that they haven’t received the certainty they need about where the British government — in many cases, their sole buyer —plans to invest.  Business owners say this is limiting their ability to make long-term plans and risks skilled workers departing for other jobs.  One representative of a mid-sized arms manufacturer — granted anonymity like others in this piece in order not to damage commercial prospects — said the problem was that the “big, bold” prescription of the SDR has given way to “repeated deferral, which always happens with delivery plans of this complexity.” INNOVATING IN THE DARK The war in Ukraine has radically reshaped other countries’ understanding of what’s needed on the battlefield, and the SDR set out a clear expectation that innovation would be rewarded. At September’s DSEI — an industry jamboree held in London — it was plain to see that private companies had stepped up to deliver prototypes for novel weaponry and other equipment, from modular robots that can deliver materiel to a battlefield and can also serve as stretchers, to AI that can read and predict threats on the ground in real time.  Defence Minister Luke Pollard said:  “We need to move to war-fighting readiness, and the SDR gave industry a very clear direction of how an increasing defense budget will be spent on new technologies and looking after our people better.” | John Keeble/Getty Images Much of that research and development was done by companies drawing on their own budgets or taking out loans as they wait for news of any specific government contracts.  For small suppliers in particular, the lag could prove existential.  One small manufacturer based in England said: “We are ready to go; we have built factories that could start making equipment tomorrow. But we can’t until an order is placed.” Armored vehicle maker Supacat has said that while its business is stable, suppliers will suffer without a predictable path ahead. “This is about the wider industry and our partners in the supply chain that have been contributing,” Toby Cox, the company’s head of sales, told POLITICO. “Our assumption is we don’t get more [orders], some of these companies will have a downturn in their orders.” KEEPING PRODUCTION LINES WARM Andrew Kinniburgh, defense director general of manufacturers association Make UK, echoed those concerns. While the industry “warmly welcomed” the Defence Ministry’s commitment to boost SME spending, he said, “the MOD must give companies certainty of long-term demand signals and purchase orders, allowing businesses to make the private investments needed in people, capital, and infrastructure.” Mike Armstrong, U.K. managing director of German defense firm Stark, which has recently opened a plant in Britain, added: “Giving the industry a clear view of future requirements is the fastest way to ensure the U.K. and its allies stay ahead.” Even some bigger companies that deal with the government on components for aircraft and submarines have privately complained about putting money into research and development without knowing what the end result will be.  An engineer working at one of Britain’s largest defense firms said: “We have multi-use items that could be for both military and civilian purposes, but cannot invest until we know what government strategy is. If it’s bad for us, it must be so hard for SMEs.” Mike Armstrong, U.K. managing director of German defense firm Stark, added: “Giving the industry a clear view of future requirements is the fastest way to ensure the U.K. and its allies stay ahead.” | Andrew Matthews/Getty Images The issue is not only one of investment, but also of skills. Supacat’s Cox said that keeping production lines warm matters because the workforce behind complex fabrications is fragile. “The U.K. has a skill shortage, particularly around engineering fabrication. If we’ve got an employee in that sector, we absolutely don’t want to lose them in another sector,” he said.  NOT LONG TO GO The Ministry of Defence said it appreciates the need for clarity. Defence Minister Luke Pollard, speaking to POLITICO at DSEI, said:  “We need to move to war-fighting readiness, and the SDR gave industry a very clear direction of how an increasing defense budget will be spent on new technologies and looking after our people better.” He argued there was “a neat synergy” between the “duty of government to keep the country safe and the first mission of this Labour government to grow the economy.” An MOD spokesperson said the defense investment plan would “offer clear, long-term capability requirements that enable industry to plan and unlocking private investment.” They pointed out that £250 million had already been allocated for “defense growth deals” alongside a £182 million skills package, and that the MOD had placed £31.7 billion in orders with U.K. industry in the last financial year. A government official rejected claims that ministers were moving too slowly, pointing to Defence Secretary John Healey’s recent announcement on new munitions factories as exactly the kind of demand signal that industry is looking for.  The director of a large U.K. defense producer said the signs from the government were “encouraging,” specifying that Chancellor Rachel Reeves, having agreed to more money for defense, “wants to see a return on investment.” While most of the country will be braced for Reeves’s big moment on Wednesday when she announces the national budget, one sector will have to hold its breath a little longer. Luke McGee contributed to this report.

Disclaimer: POLITICAL ADVERTISEMENT * The sponsor is Polish Electricity Association (PKEE) * The advertisement is linked to policy advocacy on energy transition, electricity market design, and industrial competitiveness in the EU. More information here The European Union is entering a decisive decade for its energy transformation. With the international race for clean technologies accelerating, geopolitical tensions reshaping markets and competition from other major global economies intensifying, how the EU approaches the transition will determine its economic future. If managed strategically, the EU can drive competitiveness, growth and resilience. If mismanaged, Europe risks losing its industrial base, jobs and global influence.  > If managed strategically, the EU can drive competitiveness, growth and > resilience. If mismanaged, Europe risks losing its industrial base, jobs and > global influence. This message resonated strongly during PKEE Energy Day 2025, held in Brussels on October 14, which brought together more than 350 European policymakers, industry leaders and experts under the theme “Secure, competitive and clean: is Europe delivering on its energy promise?”. One conclusion was clear: the energy transition must serve the economy, not the other way around.  Laurent Louis Photography for PKEE The power sector: the backbone of Europe’s industrial future  The future of European competitiveness will be shaped by its power sector. Without a successful transformation of electricity generation and distribution, other sectors — from steel and chemicals to mobility and digital — will fail to decarbonize. This point was emphasized by Konrad Wojnarowski, Poland’s deputy minister of energy, who described electricity as “vital to development and competitiveness.”  “Transforming Poland’s energy sector is a major technological and financial challenge — but we are on the right track,” he said. “Success depends on maintaining the right pace of change and providing strong support for innovation.” Wojnarowski also underlined that only close cooperation between governments, industry and academia can create the conditions for a secure, competitive and sustainable energy future.  Flexibility: the strategic enabler  The shift to a renewables-based system requires more than capacity additions — it demands a fundamental redesign of how electricity is produced, managed and consumed. Dariusz Marzec, president of the Polish Electricity Association (PKEE) and CEO of PGE Polska Grupa Energetyczna, called flexibility “the Holy Grail of the power sector.”  Speaking at the event, Marzec also stated “It’s not about generating electricity continuously, regardless of demand. It’s about generating it when it’s needed and making the price attractive. Our mission, as part of the European economy, is to strengthen competitiveness and ensure energy security for all consumers – not just to pursue climate goals for their own sake. Without a responsible approach to the transition, many industries could relocate outside Europe.”  The message is clear: the clean energy shift must balance environmental ambition with economic reality. Europe cannot afford to treat decarbonization as an isolated goal — it must integrate it into a broader industrial strategy.  > The message is clear: the clean energy shift must balance environmental > ambition with economic reality. The next decade will define success  While Europe’s climate neutrality target for 2050 remains a cornerstone of EU policy, the next five to ten years will determine whether the continent remains globally competitive. Grzegorz Lot, CEO of TAURON Polska Energia and vice-president of PKEE, warned that technology is advancing too quickly for policymakers to rely solely on long-term milestones.  “Technology is evolving too fast to think of the transition only in terms of 2050. Our strategy is to act now — over the next year, five years, or decade,” Lot said. He pointed to the expected sharp decline in coal consumption over the next three years and called for immediate investment in proven technologies, particularly onshore wind.  Lot also raised concerns about structural barriers. “Today, around 30 percent of the price of electricity is made up of taxes. If we want affordable energy and a competitive economy, this must change,” he argued.  Consumers and regulation: the overlooked pillars  A successful energy transition cannot rely solely on investment and infrastructure. It also depends on regulatory stability and consumer participation. “Maintaining competitiveness requires not only investment in green technologies but also a stable regulatory environment and active consumer engagement,” Lot said.  He highlighted the potential of dynamic tariffs, which incentivize demand-side flexibility. “Customers who adjust their consumption to market conditions can pay below the regulated price level. If we want cheap energy, we must learn to follow nature — consuming and storing electricity when the sun shines or the wind blows.”  Strategic investments for resilience  The energy transition is more than a climate necessity. It is a strategic requirement for Europe’s security and economic autonomy. Marek Lelątko, vice-president of Enea, stressed that customer- and market-oriented investment is essential. “We are investing in renewables, modern gas-fired units and energy storage because they allow us to ensure supply stability, affordable prices and greater energy security,” he said.  Grzegorz Kinelski, CEO of Enea and vice-president of PKEE, added: “We must stay on the fast track we are already on. Investments in renewables, storage and CCGT [combined cycle gas turbine] units will not only enhance energy security but also support economic growth and help keep energy prices affordable for Polish consumers.”  The power sector must now be recognized as a strategic enabler of Europe’s industrial future — on par with semiconductors, critical raw materials and defense. As Dariusz Marzec puts it: “The energy transition is not a choice — it is a necessity. But its success will determine more than whether we meet climate targets. It will decide whether Europe remains competitive, prosperous and economically independent in a rapidly changing world.”  > The power sector must now be recognized as a strategic enabler of Europe’s > industrial future — on par with semiconductors, critical raw materials and > defense. Measurable progress, but more is needed  Progress is visible. The power sector accounts for around 30 percent of EU emissions but has already delivered 75 percent of all Emissions Trading System reductions. By 2025, 72 percent of Europe’s electricity will come from low-carbon sources, while fossil fuels will fall to a historic low of 28 percent. And in Poland, in June, renewable energy generation overtook coal for the first time in history.  Still, ambition alone is not enough. In his closing remarks, Marcin Laskowski, vice-president of PKEE and executive vice-president for regulatory affairs at PGE Polska Grupa Energetyczna, stressed the link between the power sector and Europe’s broader economic transformation. “The EU’s economic transformation will only succeed if the energy transition succeeds — safely, sustainably and with attractive investment conditions,” he said. “It is the power sector that must deliver solutions to decarbonize industries such as steel, chemicals and food production.”  A collective European project  The event in Brussels — with the participation of many high-level speakers, including Mechthild Wörsdörfer, deputy director general of DG ENER; Tsvetelina Penkova, member of the European Parliament and vice-chair of the Committee on Industry, Research and Energy; Thomas Pellerin-Carlin, member of the European Parliament; Catherine MacGregor; CEO of ENGIE and vice-president of Eurelectric; and Claude Turmes, former minister of energy of Luxembourg — highlighted a common understanding: the energy transition is not an isolated environmental policy, it is a strategic industrial project. Its success will depend on coordinated action across EU institutions, national governments and industry, as well as predictable regulation and financing.  Europe’s ability to remain competitive, resilient and prosperous will hinge on whether its power sector is treated not as a cost to be managed, but as a foundation to be strengthened. The next decade is a window of opportunity — and the choices made today will shape Europe’s economic landscape for decades to come. 

AI is intensifying the strategic rivalry between the European Union and the United States, reshaping models of industrial policy and regulatory sovereignty. Amid a flurry of investment announcements, the exposure of security vulnerabilities and the contest over global standards, one critical factor remains largely in the shadows — seldom acknowledged, scarcely quantified and rarely debated: its environmental footprint. The environmental blind spot of a strategic technology The silence surrounding the impact of AI is surprising. A study carried out by Sopra Steria and Opsci.ai analyzing over 3 million posts about AI on social media reveals that its environmental impact accounts for less than 1 percent of the global conversation.1 Worse still, among the 100 most influential AI personalities,2 ecological concerns are only eighth on the list of subjects they discuss most, far behind technological and economic issues. > A study carried out by Sopra Steria and Opsci.ai analyzing over 3 million > posts about AI on social media reveals that its environmental impact accounts > for less than 1 percent of the global conversation AI relies on energy-intensive infrastructure that consumes resources and water, the footprint of which remains largely underestimated, poorly measured and therefore little considered in industrial and political trade-offs. This misalignment can also be explained by the trajectory of the sector itself: driven by the rise of AI, the digital sector is one of the few areas whose environmental impact is continuing to grow, contrary to the climate objectives set out in the Paris Agreement. While American players are already crushing the AI market, technological dependence must not be compounded by a setback on Europe’s carbon trajectory. This omission undermines the credibility of any European industrial strategy built on AI. To serve as genuine drivers of transformation, the leading AI companies must bring full transparency to their environmental trajectory — one they are progressively shaping for Europe. © Sopra Steria Measuring for action: The need for transparency and rigor We must not rush to condemn AI, but we must insist on setting the conditions for its long-term sustainability. This means measuring its impact objectively and transparently, equipping stakeholders with the tools for informed debate, and guiding decision-makers in their technological choices. Recent research indicates that the environmental footprint of a given model can vary significantly depending on where it is assessed, the energy mix of the countries hosting the data centers,3 the duration of the training, the architecture employed and the extent to which low-carbon energy sources are used. Breaking through the methodological vagueness means providing developers, purchasers and decision-makers with common frames of reference, impact simulators, libraries of low-carbon models and low-carbon computing infrastructures. Numerous levers for action and choice exist, provided we have the necessary data and tools. This requirement is not a regulatory whim but a strategic steering tool. Sustainability must be given as much weight as performance or security in industrial and economic trade-offs, because it determines the very viability of Europe’s strategic autonomy. At a time when free international trade faces headwinds, and as the second phase of the AI Act — in force since August 2025 — continues to overlook environmental sustainability, transparency on environmental impact must become a prerequisite for access to European markets, financing and large-scale deployment. Making sustainability a central pillar of European competitiveness Europe has an opportunity to seize. It has a robust standards base that is a powerful lever for competitiveness and responsible innovation, provided that it is supported by targeted investment, shared standards and an industrial strategy aligned with our climate objectives. But Europe can rely on something even more decisive: its people. We have world-class researchers, visionary entrepreneurs, and thriving companies that embody the best of technological and industrial excellence. The recent strategic partnership between ASML, a key supplier to the world’s semiconductor industry, and Mistral, an AI start-up, illustrates Europe’s capacity to connect its industrial and digital strengths to shape a sovereign and sustainable future4. It would be dangerous to suggest that Europe’s technological strength could be built on deferred ecology. What is tolerated as a gray area today will be a competitive handicap tomorrow. Customers, investors and citizens will increasingly demand transparency. The emergence of responsible AI does not mean making it perfect, but making it readable, controllable and adjustable. In a technological landscape dominated by two superpowers that have hitherto favored efficiency and technological competitiveness to the detriment of ethical safeguards, Europe can chart a singular course. It has the means to assert itself by defending responsible AI, at the service of the common good and in line with its fundamental values: the rule of law, individual freedom, social justice and respect for the environment. This orientation is not a brake on innovation, but on the contrary a lever for differentiation, capable of inspiring confidence in a digital ecosystem that is often perceived as opaque or threatening. By betting on ethical, explainable and sustainable AI, Europe would not be giving up global competition, but it would be redefining the rules of the game. More than ever, it must give priority to clarity, stringency and rigor. Only then will AI cease to be a technological equation to be solved and become a genuine project at the service of our society, consistent with our democratic and ecological imperatives. -------------------------------------------------------------------------------- 1. AI & environment: breaking through the information fog – Sopra Steria 2. “The 100 Most Influential People in AI 2024”, Time Magazine 3. ADEME – Arcep study on the environmental footprint of digital technology in 2020, 2030 and 2025 4. https://www.politico.eu/article/dutch-asml-invests-in-french-mistral-in-huge-european-ai-team-up/

BRUSSELS — Call it a digital love triangle. When EU leaders back a “sovereign digital transition” at a summit in Brussels this Thursday, their words will mask a rift between France and Germany over how to deal with America’s overwhelming dominance in technology. The bloc’s founding members have long taken differing approaches to how far the continent should seek to go in detoxing from U.S. giants. In Paris, sovereignty is about backing local champions and breaking reliance on U.S. Big Tech. In Berlin the focus is on staying open and protecting Europe without severing ties with a major German trading partner. The EU leaders’ statement is a typical fudge — it cites the need for Europe to “reinforce its sovereignty” while maintaining “close collaboration with trusted partner countries,” according to a near-final draft obtained by POLITICO ahead of the gathering.    That plays into the hands of incumbent U.S. interests, even as the bloc’s reliance on American tech was again brought into sharp focus Monday when an outage at Amazon cloud servers in Northern Virginia disrupted the morning routines of millions of Europeans.   As France and Germany prepare to host a high-profile summit on digital sovereignty in Berlin next month, the two countries are still seeking common ground — attendees say preparations for the summit have been disorganized and that there is little alignment so far on concrete outcomes. When asked about his expectations for the Nov. 18 gathering, German Digital Minister Karsten Wildberger told POLITICO he wanted “to have an open debate around what is digital sovereignty” and “hopefully … have some great announcements.”  In her first public appearance following her appointment this month, France’s new Digital Minister Anne Le Hénanff, by comparison, promised to keep pushing for solutions that are immune to U.S. interference in cloud computing — a key area of American dominance.   CONTRASTING PLAYBOOKS   “There are indeed different strategic perspectives,” said Martin Merz, the president of SAP Sovereign Cloud. He contrasted France’s “more state-driven approach focusing on national independence and self-sufficiency in key technologies” with Germany’s emphasis on “European cooperation and market-oriented solutions.”  A recent FGS Global survey laid bare the split in public opinion as well. Most French respondents said France “should compete globally on its own to become a tech leader,” while most Germans preferred to “prioritize deeper regional alliances” to “compete together.” The fact that technological sovereignty has even made it onto the agenda of EU leaders follows a recent softening in Berlin, with Chancellor Friedrich Merz becoming increasingly outspoken about the limits of the American partnership while warning against “false nostalgia.” The coalition agreement in Berlin also endorsed the need to build “an interoperable and European-connectable sovereign German stack,” referring to a domestically controlled digital infrastructure ecosystem.  The fact that technological sovereignty has even made it onto the agenda of EU leaders follows a recent softening in Berlin, with Chancellor Friedrich Merz becoming increasingly outspoken about the limits of the American partnership while warning against “false nostalgia.” | Ralf Hirschberger/AFP via Getty Images Yet Germany — which has a huge trade deficit with the U.S — is fundamentally cautious about alienating Washington.   “France has been willing to accept some damage to the transatlantic relationship in order to support French business interests,” said Zach Meyers, director of research at the CERRE think tank in Brussels.   For Germany, by contrast, the two are “very closely tied together, largely because of the importance of the U.S. as an export market,” he said.   Berlin has dragged its feet on phasing out Huawei from mobile networks over fears of Chinese retaliation, against its car industry in particular.   The European Commission itself is walking a similar tightrope — dealing with U.S. threats against EU flagship laws that allegedly target American firms, while fielding growing calls to unapologetically back homegrown tech. STUCK ON DEFINITION  “Sovereignty is not a clearly defined term as it relates to technology,” said Dave Michels, a cloud computing law researcher at Queen Mary University of London.   He categorized it into two broad interpretations: technical sovereignty, or keeping data safe from foreign snooping and control, and political sovereignty, which focuses on strategic autonomy and economic security, i.e safeguarding domestic industries and supply chains.  “Those things can align, and I do think they are converging around this idea that we need to support European alternatives, but they don’t necessarily overlap completely. That’s where you can see some tensions,” Michels said.  Leaders will say in their joint statement that “it is crucial to advance Europe’s digital transformation, reinforce its sovereignty and strengthen its own open digital ecosystem.” “We don’t really have a shared vocabulary to define what digital sovereignty is. But we do have a shared understanding of what it means not to have digital sovereignty,” said Yann Lechelle, CEO of French AI company Probabl. Berlin isn’t the only capital trying to convince Europe to ensure its digital sovereignty remains open to U.S. interests.   Austria, too, wants to take “a leading role” in nailing down that tone, State Secretary Alexandre Pröll previously told POLITICO. The country has been on a mission to agree a “common charter” emphasizing that sovereignty should “not be misinterpreted as protectionist independence,” according to a draft reported by POLITICO. That “will create a clear political roadmap for a digital Europe that acts independently while remaining open to trustworthy partners,” Pröll said.   Next month’s Berlin gathering will be crucial in setting a direction. French President Emmanuel Macron and Merz are both expected to attend. “The summit is intended to send a strong signal that Europe is aware of the challenges and is actively advancing digital sovereignty,” a spokesperson for the German digital ministry said in a statement, adding that “this is not about autarky but about strengthening its own capabilities and potential.” “One summit will not be enough,” said Johannes Schätzl, a Social Democrat member of the German Bundestag. “But if there will be an agreement saying that we want to take the path toward greater digital sovereignty together, that alone would already be a very important signal.” Mathieu Pollet reported from Brussels, Emile Marzolf reported from Paris and Laura Hülsemann and Frida Preuß reported from Berlin.

BRUSSELS — EU countries have five years to prepare for war, according to a military plan that will be presented by the European Commission on Thursday and was seen by POLITICO. “By 2030, Europe needs a sufficiently strong European defence posture to credibly deter its adversaries, as well as respond to any aggressions,” says the draft plan, which will be discussed by defense ministers late Wednesday before being presented to the College of Commissioners on Thursday. It goes to EU leaders next week. The Defence Readiness Roadmap 2030 is a sign of the EU’s growing role in military affairs, a reaction to Russian President Vladimir Putin’s war on Ukraine and U.S. President Donald Trump’s unclear commitment to European security. “A militarised Russia poses a persistent threat to European security for the foreseeable  future,” says the document, which was first reported by Bloomberg. While EU countries are rapidly increasing their defense budgets, much of that spending “remains overwhelmingly national, leading to fragmentation, cost-inflation and lack of  interoperability,” says the 16-page document. The EU executive body is pushing capitals to buy weapons together and wants at least 40 percent of defense procurement to be joint contracts by the end of 2027 — up from less than a fifth now. The roadmap also sets targets for at least 55 percent of arms purchases to come from EU and Ukrainian companies by 2028 and at least 60 percent by 2030. SETTING PRIORITIES The document goes point by point through a series of priorities. One of its main objectives is to fill EU capability gaps in nine areas: air and missile defense, enablers, military mobility, artillery systems, AI and cyber, missile and ammunition, drones and anti-drones, ground combat, and maritime. The plan also mentions areas like defense readiness and the role of Ukraine, which would be heavily armed and supported to become a “steel porcupine” able to deter Russian aggression. It also includes timelines for three key projects: the Eastern Flank Watch, which will integrate ground defense systems with air defense and counter-drone systems and the “European Drone Wall” recently proposed by the Commission to better protect eastern countries; the European Air Shield to create a multi-layered air defense system; and a Defence Space Shield to protect the bloc’s space assets. The Commission hopes EU leaders will approve those three projects by the end of the year. To be ready by 2030, according to the draft roadmap, projects in all priority areas should be launched in the first half of 2026. By the end of 2028, projects, contracts and financing should be in place to tackle the most urgent gaps. The Commission also wants to map the industrial capacity ramp-up needed to fill the gaps and identify supply chain risks and bottlenecks in critical raw materials. That could prove controversial, as European industry has been traditionally reluctant to share too much information about production and supply chains with Brussels. FINDING THE MONEY The document says the EU will help mobilize up to €800 billion to spend on defense, including the €150 billion loans-for-weapons SAFE program, the €1.5 billion European Defence Industrial Programme — which is still under negotiation — the European Defence Fund and, once it’s adopted in 2027, the bloc’s next multi-year budget. It underlines that countries will remain in control, stressing that “member States are and will remain sovereign for their national defence.” Despite that careful language, some member countries are bridling at the EU’s playing a greater role in defense — traditionally an area reserved for national governments. “The overriding objective must be to prepare the conditions so that Member States can fulfil their national and international capability objectives,” Germany said in its official contribution to the EU’s Readiness 2030 Roadmap. Sweden’s contribution, circulated among diplomats, said that “indicators must be output oriented and focusing on measuring tangible results,” rather than demanding to what extent countries are using specific tools like joint procurement. The military plan, under preparation since the summer, makes an effort to address concerns from across the bloc, not just the countries that feel most threatened by Russia. In a nod to Southern European nations such as Italy and Spain, it says “Europe cannot afford being blind on threats coming from other parts of the world,” mentioning the Middle East and Africa. The draft also takes pains to insist that the EU will coordinate closely with NATO. The alliance and some national capitals are worried about Brussels setting up a parallel defense structure that will complicate war plans rather than smoothly integrating with NATO. The goal is to allow the EU to become more independent in a much more perilous world. “Authoritarian states increasingly seek to interfere in our societies and economies,” says the draft. “Traditional allies and partners are also changing their  focus towards other regions of  the world … Europe’s defence posture and capabilities must be ready for the battlefields of tomorrow.”