Months before Joe Biden nominated him, National Security Advisor Jake Sullivan laid out his vision for containing Trumpism: he ditched the exhausted story of win-win globalization and proposed to beat Donald Trump on his own turf. This meant tapping into the MAGA narrative that linked the exhaustion of US global hegemony to the social dislocation manifest in the fallout of deindustrialization.
Under Trump and then Biden, the unemployed or underpaid industrial worker became the embodiment of an ailing, posthegemonic America. Fixing the condition of the American industrial worker meant restoring US leadership in the world, and vice versa: nothing captured this dynamic better than a sitting president showing up at a United Auto Workers (UAW) picket line in September.
This was a remarkable break with decades when the US state and its class of capitalists worked hand in glove to promote free-trade globalization by any means necessary. What changed? Simply put, globalization inadvertently enabled the Chinese economy to overtake the United States. Waking up to this reality, the US government decided that its own interests were more closely aligned with the average Joe who had lost his job to China than with Apple, Tesla, and the countless US firms whose profits relied on cheap Chinese labor and inputs.
Sullivan proposed to fix the United States’ internal crisis and waning global leadership by offering federal subsidies to large-scale private investment in industry. Over the following three years, US industrial policy literally changed the world. Against much internal resistance, it has forced Europeans to follow suit, opening their public purse to subsidize industrial projects or else risk a corporate exodus to the United States. This compelled some of the largest multinationals to redesign global supply chains and make tough decisions about prioritizing US or Chinese suppliers and consumer markets. How the new age of Western industrial policy actually affects workers within and beyond the Global North is far from clear: the electric vehicle (EV) and electric battery sectors provide a vivid illustration of these contradictions.
Judging by recent strikes in the United States and Scandinavia, it would be tempting to conclude that the industrial turn has strengthened labor’s bargaining position in the West, where combative unions are now setting examples fast spreading across borders. Alas, this would be a mistake on par with liberals who expected a global democratic revolution in the 2010s based on viral slogans spreading from Tahrir Square to Occupy Wall Street.
While media attention has been largely focused on spectacular gains by UAW and a strike launched by 130 Swedish workers against Tesla, what is left out from the picture is how class struggle remains subordinated to the national imperative in the new era of Western industrial policy.
In the United States, the pre–World War II cross-class compromise achieved on the back of a mounting war economy offers a dangerous precedent for an industrial coalition backed by an anti-China alliance. In Europe, the political fragmentation of labor across national lines, and the material fragmentation of supply chains, limit cross-border solidarities. For instance, western European workers and taxpayers all but ignore that electrifying their car industries relies on Russian fossil fuels and the hyperexploitation of thousands of workers from eastern Europe and the Global South.
To exploit a changing opportunity structure, labor needs a strategic supply chain perspective that identifies how corporate power reorganizes itself at the transnational level, and that organizes transnational worker solidarities without relying on partnerships with multinationals.
Anti-China Policy
At the apex of neoliberalism, US and European elites converged on the idea that competition between profit-hungry firms would optimize the distribution of resources. In this view, vertical industrial policies — state interventions prioritizing specific sectors or firms — were considered a recipe for disaster: the state was suspected of subsidizing commercially unviable projects, an inevitable drag on the public finances and source of corruption between politicians, bureaucrats, and firms. As neoliberal godfather Gary Becker tersely put it in 1985: “the best industrial policy is none at all.”
But having buried industrial policy in the 1980s, Western elites now tout it as a panacea for the social, economic, environmental, and geopolitical crises brought about by neoliberalism. The new common sense in Washington and Brussels is that markets alone can’t be trusted to stop China from overtaking the US economy, voluntarily leave fossil fuels in the ground, or mend a polarized body politic.
Green industrial policies are appealing because they offer a technocapitalist fix for a climate crisis created by capitalism. By nurturing and sealing off technologies from China, they rally bipartisan nationalism in support of a waning US hegemony. The Biden administration hopes that by delivering millions of jobs, industrial policy could also anchor the Democratic Party in a renewed alliance of middle-class and working-class voters harking back to the imaginary of the New Deal.
In North America and Europe, the revival of industrial policy is an attempt at winding back time to recapture an era before neoliberalism, when class struggle seemed manageable and Western dominance over the rest of the world was unchallenged.
Firms aren’t building battery factories today in Dunkirk or Kentucky because of irresistibly low wages or unparalleled specialized skills. It’s simply that the West is using the last tricks up its sleeve. On the one hand, the coercive powers of the US military-industrial complex threaten firms that don’t severe ties with Chinese-dominated supply chains. On the other hand, Europe and America rely on their superior fiscal space — showering investors with subsidies they can still afford until the world decides to overthrow the existing hierarchy of currencies dominated by the US dollar.
Foreign Entities of Concern
In the United States, Biden’s Inflation Reduction Act (IRA) has produced a convergence of interests between a Democratic administration seeking a broader popular base, anti-labor right-to-work Republican states using federal subsidies to attract foreign investors, and anti-China national security hawks — but also significant segments of organized labor that benefit from an improved bargaining position.
This complex compromise is embodied in the IRA’s “domestic content” regulations, which have wide-ranging consequences for US labor and the structure of corporate supply chains.
To be eligible for the full $7,500 tax credit under the IRA, EVs need to demonstrate that a certain share of critical minerals in the vehicle’s battery were mined and processed in the United States or a country that has a free-trade agreement with the United States — a minimum 40 percent in 2023, rising annually to 80 percent by 2027. A separate rule requires that battery components manufactured or assembled in North America must account for 50 percent of the battery’s value in 2023, with similar rises up to 100 percent by 2029. Chinese firms labeled “foreign entities of concern” (FEOCs) aren’t eligible because an explicit goal of the IRA is to purge them from US supply chains.
These provisions twist the arm of capital, which would happily rely on China’s towering domination in electric batteries: Chinese firms CATL and BYD account for over half the entire global e-battery market. Under the IRA’s domestic-content requirements, car makers cannot buy Chinese batteries, and Chinese companies cannot set up factories on US soil (they already tried, but faced the potent opposition of vigilantes like Joe Manchin).
For US-based auto firms, the second-best option was to enter joint ventures with non-Chinese battery manufactures: Japan’s Panasonic supplies Tesla, while South Korean trio SK On, LG Energy, and Samsung SDI supply batteries for Ford, Stellantis, and Toyota.
IRA rules have changed the opportunity structure for trade unions like the UAW, as the carrot of tax credits and the stick of anti-Chinese conditionality forced car makers to contend with US workers’ demands. What’s more, the supply-chain integration spurred by the IRA amplified the reach of the UAW, which was able to impose collective agreements even outside the auto sector in battery manufacturing, via joint ventures linking car brands and battery producers.
Nevertheless, these gains remain dangerously contingent on this policy’s support from a warmongering military-industrial complex, and indeed from GOP-run right-to-work states that attract investors by promising subsidy packages and legal guarantees against unions.
European Quagmire
In the European Union, industrial policy’s anti-China bias is more equivocal. The impetus to rid the EU of technological reliance on China mainly comes from the European Commission, which launched copycat versions of US initiatives such as the Green New Deal, the US Chips Act, and the IRA.
For the largest EU member states such as Germany and France, decoupling from China is not the endgame: Unlike the United States, these countries are attached to an export-led growth model, which necessitates Chinese inputs and capital and access to China’s consumer market. For Volkswagen — Germany’s crown jewel on wheels — China accounts for more than 50 percent of its global sales. In France, when China’s Envision AESC decided to build a battery gigafactory in Douai, President Emmanuel Macron celebrated it as evidence of French attractivité. Last September, as the European Commission announced an investigation into Chinese EVs benefitting from “artificially low prices because of huge subsidies,” German chancellor Olaf Scholz, as well as auto manufacturers’ association VDA, pushed back: they are fully aware that a trade war with China would run Germany’s export-led growth model into the ground.
The commission’s latest legislative proposals include the Net Zero Industry Act (NZIA) and Critical Raw Materials Act (CRMA). These seem modeled after the IRA’s domestic content requirements: by 2030, the commission wants the EU to manufacture 40 percent of its “green” industrial output (such as e-batteries) within its borders, extract 10 percent of the critical raw materials it uses, and supply 40 percent of its processed raw materials from EU member states.
Unlike the IRA, however, the NZIA and CRMA don’t come with anti-China rules, which leaves open the possibility for Chinese battery makers to set up shop in the EU.
Whereas US-based car makers were compelled to internalize battery manufacturing via joint ventures with battery makers, their EU counterparts have multiple options. Firstly, they can source batteries from emerging European battery start-ups such as Sweden’s Northvolt, Norway’s Freyr, or France’s Verkor, which are all in the early stages of scaling up production. For true auto giants, a second option is to produce batteries in-house, like Volkswagen, which launched its own energy storage company, PowerCo. A third option is to form conglomerates that jointly own shares in a battery-manufacturing company: this is what Mercedes and Stellantis did by financing the Automotive Cells Company (ACC). The last, cheapest option is to simply buy ready-made batteries produced in the EU by South Korean, Japanese, and also, importantly, Chinese firms. Over the past few years, the largest Chinese (CATL, BYD, EVE Power, Sunwoda) and South Korean (Samsung SDI, SK On) battery makers have all announced gigafactory projects in Hungary to supply Germany’s Audi (owned by Volkswagen), Mercedes, and BMW, which all have factories there.
Crucially, car makers are opportunistic players that use multiple strategies simultaneously. For instance, Mercedes co-owns battery maker ACC, which is currently building battery factories in France and Germany, but in parallel it has signed contracts to buy Chinese CATL batteries produced in Hungary.
The diversity of battery-sourcing strategies means that workers in EV and battery manufacturing are often employed by different firms in different countries. This is a major obstacle to replicating UAW’s strategy, which extracted gains for workers far beyond the legacy US car makers where this union is implanted: after the UAW secured substantial wage hikes among the Big Three (Ford, GM, and Stellantis), nonunionized car makers Toyota, Honda, Hyundai, and Nissan preemptively also raised wages in right-to-work states. This is an unlikely scenario in Europe. Given the EU’s patchwork of twenty-seven national labor markets segmented by laws, institutions, and even languages — and lacking transnational unions — an industrial action organized by mechanics against Tesla in Sweden has no consequence for workers in Hungary’s gigafactories.
These differences don’t mean that US labor has it any better. Overall, the United States has one of the lowest levels of unionization among rich countries, while many western European workers enjoy stronger political and economic rights.
Yet, industrial policy has been more transformative for the opportunity structure of American industrial workers than it has for Europeans. In the United States, industrial policy is used by the Biden administration to forge a new growth model and to broaden the class compromise supporting it. This project is politically viable as long as it is supported by a bipartisan anti-China coalition. In Europe, the China question pits the European Commission’s hawkish stance against the interests of key member states: overall, industrial policy has been much less transformative than in the United States, as it has largely meant deepening — rather than replacing — an export-led growth model that relies on wage compression.
Deeper Problems
In the longer run, industrial policies in America and Europe face hard constraints like aging populations and labor shortages. The solutions proposed by Western political elites are terrifying.
Hungary is an especially interesting case, because it functions as Europe’s low-cost EV transition platform where German car makers can source ready-made Asian batteries without having to wait for a homegrown EU battery supply chain to spring up, or the hassle of joint ventures.
However, Hungary also suffers from a tight labor market, with close to ninety thousand unfilled positions — and doesn’t have the workforce to satisfy German car makers’ appetite for batteries. The country’s vehemently xenophobic Fidesz government solved this problem by tapping into the Global South’s reserve army of labor with a system reminiscent of the Arab Gulf’s infamous kafala regime. If widely portrayed as Europe’s foremost crusader against immigration, Viktor Orbán’s government is willing to take in migrants so long as they remain a temporary and docile force of guestworkers, excluded from virtually all political and social rights. Hungary has, indeed, signed bilateral treaties with a dozen countries from the Philippines to Brazil to import more than one hundred thousand tightly monitored temporary workers to fill labor shortages. This influx is also used strategically to discipline demands by local workers and keep unionization at bay.
But there is more. When it transpired that Hungary not only lacked the workforce but also the energy infrastructure to support the needs of Asian battery gigafactories, Orbán’s government hastily announced the creation of three new gas-powered plants, which require a steady stream of Russian gas. In other words, electrifying Germany’s export-oriented car industry comes at the price of the supercharged exploitation of natural resources and workers from eastern Europe and the Global South.
From afar, Orbán’s Hungary might seem like an authoritarian pariah in the EU, yet it is a crucial and necessary interface where Chinese or South Korean battery makers supply German auto makers with inputs provided by Global South labor and Russian fossil fuels — all under the supervision of a hard-right authoritarian party-state. By innovating strategies that reconcile racist xenophobia, union busting, and the exploitation of workers from the peripheries of global capitalism, Hungary has turned into a laboratory for the labor regimes of other far-right governments such as Italy.
In the United States, where immigration remains taboo for conservatives, the solutions advocated by Republicans to solve shortages include child labor: counseled by think tanks such as the Foundation for Government Accountability, Republican legislators in Arkansas, Wisconsin, New Jersey, New Hampshire, Ohio, and Iowa are currently pushing state legislatures to roll back legal prohibitions against it. In parallel, the same Supreme Court that revoked Roe v. Wade is engaged in a long-term effort to outlaw strikes: according to Jane McAlevey, building up mobilizational capacity for unions now is about preparing US workers for a future of illegal strikes.
On both sides of the Atlantic, industrial policy is reorganizing corporate strategies and supply chains, so that workers employed in different sectors and in different locations face fundamentally different opportunity structures. The thinly veiled nationalist and imperialist objectives of Western states pose new dilemmas for organized labor to exploit or resist these industrial projects.
Across Borders
For workers, it would be self-defeating to accept the national scope and nationalist narratives driving Western industrial policies. An effective struggle against corporate power needs to adapt mobilization strategies to the ongoing reconfiguration of supply chains across state borders.
The obstacles to transnational labor organization are tremendous even in the EU, where workers possess a modicum of a shared European identity. In the late 1990s, many predicted the transnationalization of European trade unions and industrial movements: in 1994 a European directive created European Works Councils (EWCs) to represent workers in transnational firms, while in 1997 Renault employees organized the first simultaneous “eurostrike” in different European countries to protest a plant closure in Belgium. For the most optimistic, the European Trade Union Confederation (ETUC) would come to represent European workers with a single voice. In reality, European labor has remained politically fragmented along national lines: today the ETUC represents ninety-three trade unions from forty-one countries with radically different interests, and it has been unable to defend a unified position on crucial issues such as the project of a European minimum wage. Workers in Europe have strong reasons to fear the cross-border harmonization of labor market rules given that over the past forty years deepening European integration has been a pseudo-federalism for capitalists that advanced by eroding national legal protections for workers.
But the only alternative to transnational worker solidarities is to expect that the nationalisms used to justify industrial-policy projects in the Global North might draw benefits for some industrial workers, at the expense of increased exploitation elsewhere in global value chains.
The need to organize labor at the international level is percolating through some institutions. IndustriALL, a global confederation of trade unions in manufacturing sectors, launched a pilot project to evaluate environmental and labor standards across the battery supply chain from nickel mining in Indonesia to batteries and European car makers.
While this is a step in the right direction, the project relies on the active collaboration of a European consortium of car manufacturers to identify the most flagrant forms of corporate abuse, while — as the Hungarian case shows — perfectly legal corporate sourcing strategies accommodate new forms of exploitation even in the EU. What is needed is for transnational unions to organize worker power across the supply chain, so that they can fight radical differences in wages and work conditions across state borders.
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CONTRIBUTORS
David Karas is a postdoctoral researcher in international and comparative political economy.
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