A Strategy to enhance European Economic Security
The global pandemic, Russia’s illegal and unprovoked war in Ukraine, hostile economic actions, cyber and infrastructure attacks, foreign interference and disinformation and a global increase in geopolitical tensions have exposed risks and vulnerabilities in our societies, economies and companies that did not exist only a few shorts year ago.
Over the last years the EU has been successful both in moving forward to deliver on our priorities and at the same time in addressing vulnerabilities, whether on energy security, pandemic preparedness, or the resilience of our economies, supply chains and key technologies more generally.
However this experience has also revealed that Europe was in some cases insufficiently prepared for new and emerging risks that have arisen in the more challenging geopolitical context that we find ourselves in. The COVID-19 pandemic exposed the risks that highly concentrated supply chains can pose to the functioning of the European economy. Russia’s war of aggression against Ukraine showed how an overreliance on a single country, especially one with systemically divergent values, models and interests, reduces Europe’s strategic options and puts our economies and citizens at risk. Member States and businesses have also had to shoulder the cost of economic coercion, including bans of European exports and boycotts of European brands, designed to force them to comply and conform with the political priorities of another country. All these trends pose a direct risk to the functioning of our societies, economies and of global trade – as well as a direct challenge to the EU’s strategic interests and ability to act.
With geopolitical tensions rising and global economic integration deeper than ever before, certain economic flows and activities can present a risk to our security. More than ever, our security is deeply intertwined with our ability to make ourselves more resilient and reduce the risks arising from economic linkages that in past decades we viewed as benign. Profound technological shifts are adding to the intensity of this competition and making the economic and security challenges more complex.
New geopolitical and technological realities requires us to adapt our approach, preserving the vast majority of Europe’s highly valuable economic links to the world while ensuring that the new risks we face, which are narrow but critical, are effectively tackled.
The EU is not alone in this process: countries all over the world have started addressing challenges to their economic security. Some advanced economies have already adopted dedicated strategies and are now implementing them. Developing economies are also taking action, diversifying their economic ties to reduce harmful dependencies and increasing local production. This trend reflects the fact that only by completing traditional approaches to national security with new measures to safeguard our economic security can we ensure our prosperity, sovereignty and safety in the current age. Working together with our allies, partners, and the business sector to articulate and execute a vision of economic security will serve as a force multiplier.
While the European Union has done a lot to respond to specific challenges in recent years, it now needs a comprehensive strategic approach to economic security, de-risking and promoting its technological edge in critical sectors. The aim is to provide a framework for a robust assessment and management of risks to economic security at EU, national and business level while preserving and increasing our economic dynamism. This is all the more important to put in place at a time when these risks are both evolving rapidly and merging with national security concerns. A prime example of this is the speed with which critical new technologies are emerging and blurring the boundaries between the civil and military sectors.
The starting point for this strategy is taking a clear-eyed look at the risks and acknowledging the inherent tensions that exist between bolstering our economic security, and ensuring that the European Union continues to benefit from an open economy.
The EU is one of the most attractive destinations for global companies and for investment. Our economies thrive on open and rules-based trade and investment, on secure cross-border connectivity and collaboration on research and innovation. These elements will remain critical drivers of European competitiveness and resilience as we speed up the twin green and digital transitions. We need to rely on trade and on the Single Market to spur competition and ensure that we have access to the raw materials, technologies, and other inputs which are crucial for boosting our competitiveness, resilience and for sustaining current and future employment and growth. Similarly, we want our partners around the world to continue to benefit from access to the European markets, capital and technologies for their transition to a clean and resilient economy.
Getting this balance right is essential and can ensure that our economic and security interests reinforce each other. Achieving this will depend on the following three priorities: (1) promoting our own competitiveness; (2) protecting ourselves from economic security risks; and (3) partnering with the broadest possible range of countries who share our concerns or interests on economic security.
The priorities of an EU Economic Security Strategy
The fundamental principles for any measures on economic security flowing from this strategy will be: proportionality to ensure that our tools are in line with the level of the risk and limit any negative unintended spill-over effects on the European and global economy, and precision to define exactly which goods, sectors or core industries are targeted and ensure that measures respond to the risks themselves.
This strategy builds on the work already started at European level, taking a critical look at the Union resilience and vulnerabilities in order to make the European economy and industry more competitive and resilient and strengthen our open strategic autonomy. This ranges from bigger investment in the green and digital transitions through NextGenerationEU and the crowding-in of more private investments to the pillars of the EU industrial policy such as the Acts on Chips, Critical Raw Materials and Net Zero Industry. This was reaffirmed by the Versailles Declaration, in which Leaders agreed on the need to strengthen European resilience and sovereignty in areas like energy, health and pharmaceutical products, food security and defense capabilities. This strategy also responds to the concerns of citizens as expressed in the context of the Conference on the Future of Europe.
Implementing this strategy will require joined-up action across internal and external policies. It will also require buy-in beyond policy makers at European and national level. The private sector will be an essential partner and is already advanced in its work on de-risking. Global asset managers have radically changed their allocations of capital in response to growing and increasingly complex risks that exist within the global economy. Seeking resilient, diversified supply chains that enhance economic security will be a core part of a long-term business strategy that protects not only shareholders’ interests but also the general interest. Identifying the main risks and designing policy responses should tap into the knowledge of European companies that are already working to mitigate many of these threats.
This Communication lays the groundwork for a discussion on economic security with Member States and the European Parliament with a view to creating a common framework to de-risk and protect the Union’s economic security. This Communication will help to define the strategy that should guide the common assessment of risks, the use of existing tools and the identification of possible gaps in the EU’s economic security arsenal for which we will develop a common response.CELEX_52023JC0020_EN_TXT
To read the full joint communication, click here.