Pawel Świeboda and Georg Riekeles / Mar 2024
Photo: Shutterstock
While the twin green and digital transition has dominated the European Union’s agenda in the past five years, it will now need to be coupled with economic security considerations. In a recent report for the European Policy Centre, ‘Europe’s make-or-break moment: Putting economic security at the heart of the EU’s 2024-2029 strategic agenda’, we call for a paradigm shift on the issue, due to the massive impact economic security will exert across the continent. The main reason for this has to do with irrevocable change in the nature of the international system, which has shifted from the presumption of cooperation to being permeated by threat of conflict, tension, and rivalry.
Diagnosing this situation and its implications for the EU is essential. At this point in time, two types of conclusions can be drawn. Firstly, that a new equilibrium is emerging where a substantial degree of self-reliance will be unavoidable. And secondly, that an open conflict involving EU member states cannot be ruled out. Taken together, these are game-changing considerations.
They mean that the EU has to build significantly more resilience across all critical factors of the economy, from access to resources to infrastructure and technology. Greater strength in emerging technological areas is a case in point, not only given their disproportionate role in today’s value creation, but also to avoid unwanted dependencies. In the current global circumstances, an excessively inferior position in areas such as advanced AI, semiconductors, quantum technologies or biotechnology, becomes a liability in itself. The need for scale, speed, and directionality in the EU’s approach to harnessing technology is palpable, given the enormous impact exercised by the dominant players in the market.
In our EPC report, we argue that economic security considerations need to be addressed from the very outset of the policy process. Although the European Commission has put forward a comprehensive package of economic security measures, they mostly have to do with tightening against unwanted technology leakage and protecting against incursions into the EU knowledge generation and value creation. In the future, economic security will have to be much more comprehensive in nature and serve as a forethought of European policymakers across the entire policy agenda.
The Commission’s Strategy from June 2023 recommends applying three Ps to dealing with the economic security challenge: Promote, Protect and Partner. We propose to add one more P, to Prepare, which is meant to ensure that the EU does all that is needed to anticipate future developments and analyze emerging vulnerabilities. In the next EU term, an Economic Security Matrix of 4Ps needs to be applied to key policy areas, especially the four marked out in the ‘Resilient EU2030’-report of the Spanish presidency last September: digital-tech, energy, health and food.
There will be a need for the institutional underpinning of this new paradigm. Currently, the EU is not well equipped to deal with economic security issues with shifting modes of collaboration between Commission departments and ad hoc interest in the Council and Parliament. In the meantime, other countries have built structures which address the issue more systematically. Back in October 2021, the position of a Minister for Economic Security was created in Japan. The White House has a number of mechanisms, including the newly created White House Council on Supply Chain Resilience. Given the cross-cutting nature of the economic security challenge, the EU must be innovative in its approach. The creation of an Economic Security Council would be recommended to bring together expertise and decision-making power from across the EU institutions.
The first task of such an Economic Security Council would need to be to carry out a regular Risk Analysis across all vital functions of the economy, from water, food, energy and transport to digital infrastructure, financial markets, and public administration. It should also involve mapping critical technologies and value chains and monitoring the international flows of other key elements of the industrial base, such as investments and skills.
Will this new paradigm amount to acceptance of a zero-sum world, where aversion to risk looms large and stifles all efforts at collaboration? Not necessarily. The EU has no interest in passively observing a downward spiral in global governance. As an open economy and the main trading partner of over 80 countries of the world, the EU has an obvious stake in preserving a conducive international environment. But it also has a big stake in making sure that the safety valves are in place and that they are accepted as a legitimate level of insurance against the vagaries of an unpredictable world.
