The EU needs a balanced strategy to cut reliance on the US and China while improving its capacity to counter coercive economic threats
The European Union’s economic security strategy was initially developed at a time of close transatlantic cooperation and focused largely on risks linked to Chinese dominance of certain parts of global manufacturing. However, given the diminished commitment of the United States to its traditional alliances and to multilateral rules, EU economic-security planning now also needs to take into account the risk of US coercive action.
The EU must combine a medium-term strategy to reduce dependencies on both China and the US in critical areas with the capacity to react in the short term to threats of coercion. This requires supply chain chokepoints to be identified. There should also be a political discussion with EU countries on the circumstances in which the EU Anti-Coercion Instrument should be deployed, and the appropriate measures to respond to coercion.
The EU’s various tools for responding to urgent threats to its economic security need to be adapted to the new geopolitical context. The EU should prioritise support for research and development in relation to critical technologies and should ensure a more targeted and effective approach to state aid. It should avoid ‘buy Europe’ policies that contradict its international commitments and limit the scope for partnering with third countries.
On traditional economic-statecraft tools, screening of foreign investment needs to be transformed to responding more effectively to economic-security threats, while export controls need to be better coordinated. Given the need to de-risk relationships with both the US and China, strengthening economic partnerships has become ever more important. Moreover, more robust governance structures to manage the use of economic-security tools and partnerships with like-minded countries internationally need to be developed.
Bruegel PDFTo read the policy brief as it was published on Bruegel, click here.