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A forward-thinking approach to open strategic autonomy

Matthias Bauer / Feb 2024

Photo: European Union, 2024

 

As the EU charts its course towards economic resilience, the concept of "EU Open Strategic Autonomy" takes center stage. Balancing the pursuit of self-reliance with the advantages of global collaboration presents a pivotal choice for the EU and its Member States. Advocates for defensive trade and investment policies, exemplified by the concept of "EU Open Strategic Autonomy," argue for restrictive regulations to eliminate alleged economic dependencies. However, such a defensive stance risks adversely impacting Member States' economies.

The European Commission, supported by governments of large EU countries, has been at the forefront of promoting "EU Open Strategic Autonomy." This EU’s approach, evident in various new laws and initiatives like the "Resilient EU2030 Report on Open Strategic Autonomy," seeks to reduce external dependencies and enhance the EU's technological leadership. The recent Economic Security Strategy initiative, including a list of 10 critical technology sectors, aims to further diminish economic dependencies and mitigate the risk of coercion.

Strategic autonomy policies span economic resilience, technological sovereignty, and geopolitical influence, with interventions aimed at industrial and trade policy, addressing market failures, ensuring production standards, and responding to non-EU governments' trade measures. These policies aim to reduce dependencies on non-EU entities and enhance the EU's self-sufficiency in goods, services, and technology.

Trade Dependencies

In a recent ECIPE study, we looked into major claims made by the EU regarding trade dependencies, and we show that common notions about “critical dependencies” lack support from actual trade data. With the exception of a few products like minerals and energy commodities, the EU does not exhibit critical dependencies on goods and services imported from outside its borders. Concerning technological leadership, financial transactions related to intellectual property rights illustrate that EU businesses and public institutions greatly benefit from advanced foreign technologies and innovation. Many, if not most, of these technologies play a pivotal role in enhancing the EU's international competitiveness and are challenging to substitute with domestic EU production. Simultaneously, the EU emerges as a significant exporter of technologies, particularly in ICT and digitally enabled services, which are not easily replaceable by non-EU countries. Recognizing these mutually advantageous interdependencies becomes essential for policymakers, serving as a safeguard against potential risks such as disruptions in value chains and economic coercion resulting from policy-induced changes.

Our results urge for a nuanced approach to address critical dependencies as many products that could be classified “dependent” are in fact easily substitutable in global markets, while others, like certain chemicals and pharmaceutical ingredients, indeed pose potential challenges to European economies.

Contrary to political notions about technology-intensive trade, the EU demonstrates a fairly balanced trade relationship. The reciprocal nature of trade – being a safeguard against economic coercion – is evident in ICT and digitally enabled services, where the EU's exports are nearly on par with imports globally, including the US. At the same time, intellectual property transactions reveal significant benefits for EU businesses in areas like biomedical and digital technologies, emphasizing the imperative of sustained international technology collaboration.

Economic Risk Mitigation: A Forward-Thinking Approach to Open Strategic Autonomy

Rather than succumbing to a broad fear of dependency, the EU should tailor its policies, focusing on specific products and export destinations while diversifying suppliers and enhancing inventories for critical items. In sectors like cloud services and ICT technologies, non-EU reliance is essential, urging the EU to avoid discriminatory regulations that could hinder Member States' economic development. Recognizing subsidies as a costly and inefficient technology gap solution, judicious resource allocation is urged, ensuring essential policy goals in areas like housing, education, and sustainability are not compromised. Steering clear of an excessively value-oriented policy, the EU should champion regulatory cooperation with like-minded democracies, promoting competitive taxation, professional skills development, and deregulation through a strengthened EU Single Market.

Global markets, international R&D collaboration, and adherence to global industry-led standards are crucial for innovation and efficiency in technology-intensive sectors. EU policymakers need to uphold the EU's commitment to open markets and global cooperation, fostering partnerships that enhance Europe's economic resilience and security capabilities. The EU must embrace international cooperation and collaboration in technology-driven industries to maintain competitiveness and global relevance.

Being attractive to and allowing for access to trade and investment, particularly in advanced technologies, will continue to play a pivotal role in fostering economic growth and maintaining high living standards within the EU. Thus, contrary to political fears of dependency, the EU should acknowledge and leverage mutually beneficial interdependencies. EU policymakers and Member State governments should focus on promoting trade and investment relationships with trustworthy partners such as the US and OECD countries. Instead of limiting imports, the EU and Member States should initiate supply-oriented structural reforms to enhance production factors' capacity and efficiency, ultimately boosting Europe's export performance. By prioritizing trust, legal certainty, and collaboration, the EU can navigate the challenges of an interconnected world, reinforcing its global role and contributing to international stability.

 

Matthias Bauer

Matthias Bauer

February 2024

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