On Wednesday, the European Commission unveiled a broad economic security strategy aimed at helping the European Union better anticipate, gauge, and counter increased threats to its market. In doing so, the bloc singled out China as the main source of strategic risk. The new doctrine constitutes one of the EU’s boldest moves yet to fend off the negative influence of geopolitics on its economy that are gradually undermining global trade flows, supply chains, and technological leadership.
The move comes while both China and the United States are doubling down on nationalist economic and industrial policies that are fundamentally changing global trade. The trade and economic security commissioner of Europe, Maroš Šefčovič, referred to the strategy as smart essential modernization and termed it the EU’s new “software” for a world characterized by economic statecraft.
“Europe is still a champion of open trade and global investment but openness without security is just vulnerability,” said Šefčovič. “In order to stay resilient in a changing geopolitical and geo-economic environment, we need to be more strategic and assertive in the use of our existing tools, as well as develop new ones to support our economic security.”
A Direct Response to China’s Growing Economic Leverage
The scheme comes after a series of steps taken by Beijing that uncovered the EU’s economic vulnerabilities. Over the past few weeks, China has warned of limiting the export of rare earth elements, thereby putting Europe’s automotive, defense, and high-tech industries at the risk of being disrupted. Moreover, it is said to have impeded the shipment of the much-needed automotive chips to the Netherlands-based Nexperia, thus underlining the EU’s reliance on the outside suppliers for the most crucial components.
Now, Brussels intends to improve its capability to recognize and lessen the dependencies in those industries where the Chinese have turned to be the most potent for example they include such areas as the production of the indispensable minerals, semiconductors, digitization, and the tech that is at the core of the future of industry.
To bring that goal about, apart from setting up FDI-screening with a trade-defence corner, the Commission will also seek to invite economic security into trade-defence measures by, e.g., subsidy investigations, FDI-screening, anti-dumping operations, and by the employment of the anti-coercion instrument that the EU has voted for in 2023 and that dates back to when Brussels was given the possibility to apply mitigating mechanisms upon the foreign government’s economic pressure.
Other issues the European Union Faces: Military Espionage and Risk of Strategic Infrastructure
The great concern of protecting the continent’s most influential resources from the industrial espionage and predatory takeover-style was another significant issue. Besides the Commission envisioning extended examination of companies, they also want the community and the burgeoned infrastructures – be it tangible or digital – to be in the most sensitive fields – to be under the scope of scrutiny.
“It is necessary to bolster our capability to collect as well as distribute economic intelligence information, as real security can only be achieved when Europe is acting as a single entity,” said Šefčovič, pointing out that EU member states and industry should jointly work not only more closely but also intensively.
Nevertheless, the Commission refuses to disclose the method it intends to use in sorting out such cases where companies in advanced strategic areas – like quantum technology – finding difficulties in getting EU-based financing and consequently, fearing foreign influence.
An EU top brass pointed out these issues: “There are concerns that we would be allowing the passing of the ownership of the technology holders from European hands to other parties, and not for good reasons.”
The EU will give the quantum industry priority over other sectors when it comes to financing critical quantum devices and services either directly or through “like-minded partners.” It also has plans to stop the dependence on the most unsecured quantum or cloud service providers in the sensitive sectors such as the pharmaceutical industry and banking.
How the EU is Planning to Wean Off Dependence on China-Dominated Markets
Where production of electric vehicle batteries is concerned, and China is the main producer for the world market. The EU intends to do that through technology and knowledge sharing thus make their local production stronger. Besides, the Commission talked about the necessity of incorporating the private industry in the decision-making sector as most of the risks come from the corporate supply chains.
The initiative is contingent upon the emergency laws enacted during the Covid-19 pandemic and the period following Russia’s invasion of Ukraine, which were mainly aimed at securing the flow of goods, services, and labor, considered necessary for the crisis-halted industries, in which the Commission will also be able to set up the trusted industry advisory group to facilitate the identification of real-time risks to support these mechanisms.
Building Alliances Outside Europe
The EU wants to further the collaboration with partners worldwide who come across similar issues and are willing to work together for the eventual prevention of the formation of competitive geopolitical trade bloc. Besides Japan being the country that will help to implement the strategy and candidate countries getting the benefit, the plan also helps Europe to remain competitive with both of them for political and economic leverage.
With the global economic order rapidly changing, the Commission holds that only a coordinated and proactive approach will be able to safeguard Europe’s long-term strategic autonomy. The new strategy represents a clear move by the EU towards tighter controls, more intelligence gathering, and a more defensive stance in its economic management. The EU considers such a model as necessary if it wants to maintain its resilience in the increasingly contested world.
