December 19, 2023
Three next steps for the EU’s approach to economic security
The EU’s Strategy on Economic Security, published this summer, was the first official effort to present a more coherent view on the European policy approach at the intersection of economics and geopolitics. Most importantly, the document indicates that the EU takes the theme of economic security increasingly seriously, signaling an effort to shift away from the EU’s traditionally more technocratic approach to economic policy.
Unfortunately, the document was vague on several major points. As has been emphasized by the EU itself, its June 2023 communication on economic security was just a first step. In the next phase, the EU’s leadership must provide clear guidance in three areas. First, in the short run, the EU’s understanding of economic security challenges needs to be fostered by clarifying what the key concepts of the strategy actually mean. Then, second, more coherence is needed between the EU’s approach to economic security, the EU’s official political goals and policy instruments, and Europe’s longstanding existential challenges. Doing so effectively depends on the third, more long-term element, which requires the adaptation of the EU’s institutions to the changing world order.
The EU’s reluctant shift away from multilateralism
The EU is reluctantly adapting its economic governance model to a world in which economic relations are increasingly dominated by geopolitical and security dynamics, and by national power instead of international rules. In this world, the logic of conflict dominates the logic of cooperation. Although the European Commission and the EU member states understand that the world has changed, many European policy makers remain attached to a belief in multilateralism, so this shift does not come naturally.
The way the EU is set up is geared towards a predictable, rules-based system. Furthermore, because of its inner make-up, which allows for deliberation between national capitals and EU institutions, the EU may be at a relative disadvantage compared to both the United States and China as it tries to strengthen its economic security in a context of geopolitical strategic competition and conflict.
Yet the EU also has more experience than its peers handling disputes when regulatory decisions become politicized. One of the Common Agricultural Policy’s underlying rationales was to ensure that Europe would always have sufficient access to food by controlling its own production. Also, the EU’s trade policies have often had a political component: many developing countries were granted EU market access in exchange for domestic reforms. EU competition law evolved, partially, in order to prevent American companies from dominating the European market.
The first challenge for the EU’s approach to economic security is to make it clearer what the text actually means. Doing so will also help to identify blind spots in the EU’s strategic approach. For example, what does the European Commission actually mean with ‘economic security’ and ‘strategic dependencies’? While the apparent conceptual vagueness allows room for maneuver, it also threatens to undermine more concrete, tangible steps. And the current strategy also fails to make it clear how the different instruments and tools listed relate to each other and to the notion of economic security.
The EU also needs to understand that the risks to its economic security may not be ‘narrow’–as the strategy states. In fact, as the world order is shifting, in financial, technological, and military terms, the entire structure upon which the EU’s trade and investment relations is built may be at risk. To understand this, the EU must consistently look through a historical lens at the world’s financial and economic system and appreciate how that relates to the world’s military balance. Looking at historical trends, the EU may be forced to acknowledge that it faces much more profound economic security challenges, which may not be remedied with some technology subsidies here, some trade mechanism there. These challenges include, on the one hand, Europe’s long-term economic growth rate, and on the other hand, Europe’s dependence on the US military power to protect Europe’s economic interests.
Second, if Brussels is truly serious about economic security, the EU will need to reconsider adapting its institutional structure. While DG Trade created an anti-coercion unit, that may not be enough considering the scope of the strategy. However, the theme of economic security spans almost all the Commission’s DG’s, from Culture to Space. And national security remains a member state competence, which requires the role of the Council.
The scope and importance of economic security require that it be coordinated centrally and that it become the key responsibility of a future Commissioner. Also, to implement and develop the strategy, more high-level and pan-European coordination is required. That could be a Commissioner, or ideally someone combining the economic competencies of the Commission and the security competencies of the Council—akin to the High Commissioner. Such political responsibility must go hand in hand with specialized support personnel, with intricate knowledge about economic security and geopolitics.
Not all EU member states will like greater reach of the European Commission in matters of economic security. It will therefore be up to the Commission to convince the EU member states that their core interests are at stake in the longer run if the EU lacks the competencies and capacities to confront the economic security challenges. However, to convince the EU member states, the Commission will have to develop a better vision on economic security; the current one fails to address why economic security should be at the core of European integration. That leads to the third and most important point.
Third, the EU’s approach to economic security needs to take into account Europe’s existential woes, economic and societal. Additional bureaucratic structures and policy initiatives for economic security will not suffice to address those. The most important discussion about Europe’s economic security is how Europe can sustainably increase its economic growth rate, while strengthening its democratic values and rule of law, its socioeconomic cohesion and cultural-historical heritage, and its global geopolitical position. That should be the guiding principle, the touchstone for all European policy initiatives, whether those are called ‘economic security’, ‘strategic autonomy’, or something else.
The legitimacy of the EU and of its strategic approach to economic security depends on whether they serve Europe in the long run. Therefore, instead of focusing on technical details and institutional set-ups, the EU’s approach to economic security ought to be guided by more profound debates about the EU’s long-term political objectives. To what extent does the EU want to reinforce its liberal democratic values and internal rule of law? To what extent does the EU want to reinforce Europe’s middle classes and socioeconomic cohesion? And which security and defense strategies are needed to ensure that the EU can successfully attain its internal political objectives in an inherently unstable and uncontrollable international environment?
In the end, however, the EU’s approach to economic security can only be successful if it is tied to Europe’s long-term political objectives. This will also require that the EU’s policy makers consider how the evolving approach to economic security will benefit the values and interests of Europe’s citizens.
Dr. Elmar Hellendoorn is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center and former advisor to the Government of the Netherlands
At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.
Further reading
Fri, Jun 16, 2023
What the EU’s economic security strategy needs to achieve
Econographics By Elmar Hellendoorn
The Commission must balance members' economic relations with China and simultaneously coax them toward a more “realpolitik” view of the world. None of that will be easy.
Fri, Sep 22, 2023
Dutch Deputy Prime Minister Sigrid Kaag on how the EU can use geoeconomic tools to ‘assert itself on the international stage’
Transcript By
At the Transatlantic Forum on GeoEconomics, the Dutch finance minister also laid out the "significant effect" that sanctions have had on Russia's economy.
Fri, Sep 22, 2023
Robert Habeck on Germany’s new approach to ‘economic security’ and ‘selective multilateralism’
New Atlanticist By Daniel Hojnacki
Habeck spoke at the Transatlantic Forum on GeoEconomics about rising populism in Europe, Germany’s changing economic model, and what Washington’s competition with Beijing means for US-German relations.
Image: Brussels, Belgium March 2020: European Commission Building and EU flags/iStock