How a Dutch minister’s butterfly stroke caused a hurricane in the global car industry: at the end of September, Vincent Karremans (Economic Affairs, VVD) intervened harshly at the Dutch chip company Nexperia. Intended goal: to prevent Nexperia’s Chinese CEO Zhang Xuezheng from completely moving knowledge and production of Nexperia chips to China. At the same time, a lawsuit for maladministration was pending at the Enterprise Chamber against director Zhang, who was suspended in an accelerated ruling.
There is still some mist surrounding the exact course of events at the time and since then. But the consequences soon became crystal clear. China, which was unpleasantly surprised, stopped the export of Nexperia chips produced in that country. Despite their relative simplicity, these chips are crucial for the automotive industry and especially for suppliers. A modern car with all its automatic processes, from rain sensor to seat memory, is full of them.
In Europe, but also in the US, the automotive industry soon faced chip shortages, which posed a serious threat to production. And although diplomatic work, up to and including the White House, has allowed supplies from China to resume somewhat, the danger has not yet disappeared.
The Nexperia case is now a telling precedent. First of all, it may be concluded that the current outgoing cabinet apparently has insufficient contact with the Netherlands’ European partners, via Brussels but also bilaterally. That is a problem that has been plaguing Prime Minister Schoof’s team, or what is left of it, since he took office. Especially now that there is so much going on internationally at the same time, coordination is crucial. This also applies to explaining and defending Dutch interests.
China’s harsh response to the Nexperia case shows that a pact has little future outside the US
Separately, there is the fierce reaction from China, which is increasingly reluctant to use its dominance in the global production of goods and raw materials for its geopolitical interests. See also the use of rare earth metals, where China is by far the largest player in the global economy in both mining and refining. These components, which are crucial for many products – including the energy transition – are quickly becoming a diplomatic weapon.
Europe is already in the corner where the blows are falling. The increase in American import duties by the Trump administration, which was implemented from April this year, is already putting strong pressure on the European Union. And the consequences are still happening. The US clearly sees this means of power – in addition to Europe’s military dependence on the Americans – as an opportunity to intervene in European legislation, such as that regarding the tech sector and social media. Earlier this year, the European VAT was even described as a levy on American imports – while this tax applies to almost all goods and services in the EU.
The initial European reflex was outside the US to increase trade relations with the rest of the world. But the most important player, China, is emerging not so much as an attractive alternative to a hostile US, but as an additional threat. In this sense, the Nexperia case is welcome: it clarifies once again that in the geo-economy of this era, the enemy of your enemy is not automatically your friend.
What doesn’t help is that China itself seems to find little room for leniency. The Chinese economy is probably struggling, although there are doubts about the statistical evidence. For example, two years ago the country changed methodology for youth unemployment statistics after it rose to record levels. Chinese economic growth figures are often viewed with some suspicion.
Stimulating domestic consumption at the expense of the still sky-high domestic investments, advocated by many economists, does not seem to have happened yet. And this means that the surplus production of Chinese industry, which does not find additional domestic sales, must be sold abroad. Europe is the obvious candidate, especially now that the US is behaving so assertively in trade relations.
Europe is caught between two economic superpowers, the US and China, and must find its own way. The Nexperia case indicates that, when push comes to shove, little good will can be expected. From any trading partner. In that sense, the idea behind Karremans’ intervention, in all its tactical clumsiness, was defensible.
Nowadays, a preference for more self-sufficiency and production of essential goods and services in one’s own area is in principle regrettable. Trade has long been about promoting peace, prosperity and mutual understanding. Of course, that was never without national interest. But now that the global economy threatens to turn into a (trade) war of all against all, extra attention will have to be paid to the transfer of ownership to European countries in essential industries and to the preservation of technological knowledge. And to the enormous negotiating value of whether or not to grant access to the European market.
For the Netherlands, the Nexperia case points above all to the importance of a new stable cabinet of experienced administrators that can find its way to Europe again. And with some haste. Because time is currently as scarce as international trust.
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