The European Commission officially unveiled plans to strengthen the EU’s economic security on Wednesday (24 January), marking the latest attempt by Brussels to counter Chinese influence over strategically sensitive areas of the bloc’s economy.
The so-called Economic Security Package, the details of which were first reported by Euractiv last week, follows the Commission’s proposal in June last year for Brussels to be given greater oversight of foreign direct investment (FDI) into the EU as well as outbound investments by European companies.
It also comes as part of a broader initiative by Commission president Ursula von der Leyen to “de-risk” the bloc from China, first announced in March 2023.
“It’s a very simple observation that lies behind this strategy: that there is fierce competition worldwide for the technologies that we need the most,” Commission executive vice president Margrethe Vestager said at a press conference announcing the new plans.
“And in this competition, Europe cannot just be the playground for bigger players. We need to be able to play ourselves.”
A vague improvement?
In addition to enhanced screening of FDI into the EU and greater coordination among member states to identify possible risks associated with foreign investments, the new package calls for “more effective EU control” of goods exports with “dual-use” (i.e. civilian and military) potential.
It also calls on the European Council to recommend specific measures aimed at “enhancing research security” across the bloc.
Elaborating on the package, Vestager’s fellow executive vice president Valdis Dombrovskis said that while the Commission would consult with member states and other stakeholders to “define the parameters” of the outbound investment controls, the Commission itself would recommend “focussing on a narrow set of sensitive technologies” including artificial intelligence, advanced semiconductors, quantum, and the biotech industries.
Alicja Bachulska, a policy fellow at the European Council on Foreign Relations (ECFR), told Euractiv that the package represents “an important step” forward, but criticised it for being “vague”.
She also noted that the proposal largely fails to take into account its negative potential impact on businesses.
“If these policy changes are to be taken seriously, they will incur some costs,” she said. “And while these costs might be necessary for the EU to retain its economic competitiveness over the long run, from the short-term perspective, they will raise tensions between some business communities and Brussels.”
Bachulska’s analysis was corroborated by a statement issued on the same day by Ulrich Ackermann, the head of the German machinery industry association’s (VDMA) Foreign Trade office.
“European investments abroad do not jeopardise public security and order in the EU,” he said. He added that the new measures would make “export controls more complex and complicated, with even more bureaucracy for the companies concerned, without leading to improvements”.
‘Too much soft coordination’
Sander Tordoir, a senior economist at the Centre for European Reform, similarly praised the package’s general sentiment but criticised it for proposing “too much of the same soft coordination that has failed us so far”.
“I think directionally, it makes sense what they’re doing,” Tordoir told Euractiv. “They’re focussed on the right fault lines in the toolkit, like export controls and FDI screening, where Europe has been most vulnerable, fragmented.”
“[But] they need to be more aggressive and properly ‘Europeanise’ this so that China cannot lean on individual member states to get the EU to fracture,” he added.
Tordoir also pointed to the US’s success in pressuring the Netherlands last year to curb its sale of advanced chips to China as another notable example of why greater EU coordination in determining export controls is required.
“The US of course remains an ally, but sometimes our interests diverge,” he said. “I think having the whole EU behind these kinds of initiatives would be much better.”
Tordoir further noted that the Commission appeared to have “backtracked a bit” from its more stringent, pro-centralisation proposals issued last year.
He attributed this move to the fact that 2024 is an election year and that von der Leyen is likely cautious about stripping certain member states – especially Germany, whose closest trading partner is China – of its ability to determine its own economic security strategy.
“I think a short-term tactical political view probably won the day,” he said.
The EU’s new plan comes at a time of growing economic fragmentation. At the World Economic Forum in Davos last week, European Central Bank president Christine Lagarde repeatedly emphasised that countries – especially those in the EU – currently emphasise “security” over “efficiency” in their relations with other nations.
Her remarks were echoed on Wednesday by Commission executive vice president Dombrovskis.
“The last few years have taught us some hard lessons about the risks of excessive dependence,” he said, referring to the supply-chain shocks triggered by the Covid-19 pandemic and the energy crisis precipitated by Russia’s invasion of Ukraine. “To preserve the EU’s openness we must address these risks.”
[Edited by Jonathan Packroff/Nathalie Weatherald]
