The European Union has unveiled a broad but timid economic security plan.
Europe became addicted to Russian gas. Today, it risks dependency on Chinese telephone infrastructure and electric vehicles.
In response, the European Commission has unveiled a series of proposals to protect its economy. The plan aims to tighten export controls, restrict investment abroad in sensitive industries, and screen inbound foreign investments in sensitive sectors.
It’s a cautious strategy, less ambitious than the US’ China-targeted security crusade — in large part due to the EU’s unwieldy structure. And while the EU targets today are Russia and China, some of the same measures could be redirected against Washington, particularly if Donald Trump becomes president.
The package builds on European Commission President Ursula Von der Leyen’s geopolitical blueprint, which seeks to infuse national security considerations into economic policy. This translates into stepped-up public funding and protective tariffs or quotas to protect strategic industries such as artificial intelligence, quantum computing, and semiconductors. On both sides of the Atlantic, the immediate goals look similar — to hurt Russia and “de-risk” from China.
After Moscow’s full invasion of Ukraine, the US and EU coordinated export controls on Russia. They have moved together to prevent China from obtaining the latest semiconductor tools. The Netherlands banned the export of Dutch manufacturer ASML’s advanced silicon chip-making machines. The EU launched an investigation into Chinese e-vehicle imports.
But the overall European approach remains timid. As a single country with a single executive, the US can move faster than a loose federation of 27 different nation-states. While the EU runs trade policy, member states remain responsible for national security. The EU can pass new legislation to vet restrict, and control inward investments. It must share responsibility with Paris, Berlin, and other national capitals for export controls and outbound investment.
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This helps explain why white papers and communications, not specific legislative proposals, dominate the new EU plan. A white paper on export controls explores ways for greater coordination among national governments over individual decisions. Another white paper suggests attempts to understand risks stemming from EU strategic industries’ outbound investments and to tighten R&D security in dual-use technologies. A recommendation aims to upgrade research security. In most areas of economic security, Brussels has little say beyond cheerleading continental alignment.
Even on inbound investment screening, which falls under the EU’s trade policy, the proposed binding reform, if approved, will only come into force in a couple of years. It would require all EU member states to create a screening process: Greece, Ireland, Bulgaria, Cyprus, and Croatia currently lack such a mechanism. But nation-states would remain the ultimate arbiter — so Germany could continue, for example, to approve Chinese investment in the Hamburg port.
European unity against Russia and China is difficult to achieve. Hungarian Prime Minister Viktor Orbán has made headlines for his obstinate refusal to back Ukraine’s funding package and for his wooing of Chinese investment. German business depends on sales to China. In contrast, other EU countries led by the Baltics believe the bloc is not going far enough in shielding itself against both Russia and China. Brussels faces a tricky job of harmonizing the European approach.
Expect turbulence. On both sides of the Atlantic, elections lie ahead. Murmurs about US protectionism are growing louder. A new US administration could target not just China, but the EU as well. Former President Donald Trump has already announced his intentions to impose high tariffs on all goods imported into the US. This would affect Europe along with authoritarian states.
So, while Europe’s economic security plans now target Russia and China, this could change. European Commissioner Thierry Breton, the main architect of the continent’s digital sovereignty campaign, has announced security risk assessments on key tech products including semiconductors, cloud, satellite connectivity, and data analytics. US and democratic Asian countries dominate these fields. These security risk assessments are supposed to consider “geopolitical factors.” Already, Commissioner Breton has signaled his intention to reduce European reliance on US-dominated cloud.
The EU’s new economic security plan recognizes the challenges to stand up to Russian aggression and Chinese threats — and the decline of the global free trade consensus. Countries around the globe are erecting higher economic walls. This shifting geopolitical landscape will test transatlantic unity, even with the most ambitious European economic security plan.
Clara Riedenstein is a Research Assistant with the Digital Innovation Initiative at the Center for European Policy Analysis.
Bill Echikson is a non-resident Senior Fellow at CEPA and editor of Bandwidth.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.
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CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy.