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Economic security is (inter)national security

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By Hendrik Bourgeois, Vice-President Government Affairs, Europe

European Commission President Ursula von der Leyen’s “de-risking not decoupling” speech at the World Economic Forum in 2023 was a remarkable one. It was probably the first time ever that the EU leadership acknowledged what their US counterparts had always known and practiced – that economic security is national security. Today, “de-risking” has come from being the talk of the town to an official and high priority policy area for the EU and G7 countries. Almost exactly one year after the speech by von der Leyen in Davos, the European Commission outlined its proposal for how the EU’s economic security should be achieved in practice. I am sure many will agree with me in saying that the best and most efficient way to increase the EU’s economic security is to drastically improve the EU’s competitiveness. Or, said differently, the best way to defend the EU’s economy lies in its ability to be as good or better performing than other ones. Stayed tuned later this year to find out what Mario Draghi will propose as measures that the EU needs to adopt to achieve that. However, in addition to improving competitiveness, economic national security has another dimension: international cooperation.

Unsurprisingly, at its core, the European Economic Security package is a series of calls on Member States to cooperate with each other more closely on investment screening (inbound and outbound alike), export controls, and research security. When presenting the package, both Trade Commissioner Dombrovskis and Competition Commissioner Vestager appropriately stressed that “strengthening partnerships around the world” is an indispensable ingredient of the economic security formula.

International cooperation is important when we recognize how the supply chains of today work. Take the present-day semiconductor industry for instance. China provides the raw materials, Europe offers R&D and manufacturing machines, the US owns the design and IP and part of the manufacturing, and Taiwan and Korea do most of the manufacturing. No country’s semiconductor industry can achieve self-sufficiency. International cooperation is the bread and butter of the industry’s business model. Europe should absolutely be improving its relative position in the value chain. But we must also recognize that we simply cannot do this alone.

When it comes to strengthening international partnerships, the transatlantic one is key for the EU and for the European economy at large, but especially for the digital and technology sectors. Therefore, the foundations of Europe’s competitiveness in the digital era lie in a strong EU-U.S. relationship.  The Trade and Technology Council (TTC) seeks to deepen and strengthen that partnership. The most recent 5th TTC ministerial meeting yet again showed that common challenges are best tackled together. The CyberSafe Products Action Plan, the semiconductor industry roundtable, and the agreement to coordinate approaches to export and investment controls are further concrete examples of how moving forward together advances the economic security interests of Europe and the US far more than working in isolation ever could. In addition, other international organizations, like for example the OECD, are looking into possible solutions to address vulnerabilities in the global semiconductor supply chain. Lastly, NATO members as well should be working together more closely to foster dialogue and practical cooperation between NATO and partner nations in this area.

However, to build a working economic security framework for Europe’s industry, the Commission and Europe’s political movers and shakers will have to work in tandem for many years to turn the initiative into binding rules. 

Moving forward, three things will be essential for the EU, no matter what:

  1. Building stronger trade relationships with like-minded partners;
  2. Developing a clear common EU policy on export controls, aligned as much as possible with the US;
  3. Delivering a balanced approach towards foreign investment and outbound investment controls that doesn’t impede putting brakes on the competitiveness of industrial players in Europe

Europe’s economy is undergoing a once-in-a-generation change and the twin digital and green transition can set us up for success for decades to come. But this change is not taking place in a vacuum, and to shape Europe’s economic future it is important to tackle challenges taking place on the world stage. There is now an opportunity to build a future in which industry and politics work hand in hand and turn ambitions into actions.