The EU’s long-term political guidance includes ambition participation in global affairs with an idea of becoming a serious player in the world. The article suggests a preliminary analysis of the declared Commission’s “reset-mode” concerning new aspects in the EU’s role in the global political economy and governance: i.e. in geo-politics and geo-economics. Besides, about a decade ago, the EU declared in its basic Treaties some “fundamental values”, which have become quite attractive for the rest of the world: hence, more states around the world are looking at the EU for inspiration in their perspective socio-economic growth. It is, for example, evident that most of the so-called happiest nations in the world are among the European Union’s member states…
The third article in the series on global governance attracts attention to the EU’s role and place in the modern world order. The EU’s role in modern system of global governance has been constantly increasing: presently, the EU’s politico-economic block of 27 states has become a major trade power in the world with its GDP on par with the US’s biggest global power; the global GDP, as calculated by the year before the Covid-pandemic, has been at the level of $80 trillion. In the so-called global “GDP-trillion club” there are presently about 20 states and economic regions, including the US ($20 trillion) and the EU-27 ($17, 5 trillion), followed by China -$12 trill., Japan and Germany with $4-5 trill each, as well as some “blocks”, like Mercosur -$2,8 trill., Eurasian Economic Union -$1,8 and so on…
Hence, the EU’s “strategic security” and economic independence are becoming an integral part of the ambitious idea of gaining an important place in modern globalisation.
EU and digitalisation in geo-economics
The EU has been actively participated in the OECD and the G-20 Digital Economy Task Force during 2020-21; the G-20 ministerial dialogue in August 2021 focused on leveraging digital transformation for a resilient, sustainable and inclusive recovery. Discussions also included issues pertaining to digital transformation in production, trustworthy AI for small firms and start-ups, measurement of the digital economy, consumer protection, connectivity, data flows, and digital government.
The EU also took part in G20 efforts in realising the potential of digitalisation in the context of research and higher education systems. With critical issues around skills, ethical principles and values for research, and digital research infrastructures, the international community actively debated recommendations on “access to research data from public funding” and on international cooperation on science, research and technology.
In recent “State of the Union’s” address to the European Parliament (in September 2021), Commission President specifically mentions semiconductor sovereignty: this priority reflects the importance of investing in the European technology’s sovereignty with additional attention to digital transformation according to the EU’s rules and values.
However, digital progress goes together with massive chips’ production: despite growing demand and intensive whole production lines the member states feels a shortage of semi-conductors. Thus, the new European Chips Act is aimed at boosting European coordination in the world-class research, design and testing capacities in electronics with the national investment along the value chain. The aim is to jointly create a state-of-the-art European chip ecosystem, including production, which would ensure the EU’s security of supply and create new markets for ground-breaking European electronic technology.
Faced with a global chips shortage and heavy dependencies on Asian states and the US, the EU wants to boost its share of the global chips market to 20 percent by 2030. The US has already proposed in 2020 a Chips for America Act to pour tens of billions of dollars into the sector; other countries are investing heavily in the technology, too.
The EU’s geo-political power
The EU in the geo-economics represent about 16-17 percent of world trade, compared to about 12 percent of the US; the EU’s foreign assistance network covers about half of the global, compared to about 20 percent for the US. The EU’s military assets account for 20 percent of world’s military spending, compared to 43 percent for the US, about 10 percent for China, 5-6 percent for Russia and 2-3 percent for India and/or Brazil.
Among politically, as well as economically, important issues on the global scene, there are for example some international challenges like energy, climate and digital issues.
On the European level, the EU’s strategic goal is to enable the member states to follow low-carbon development paths and to make their economies more resilient to the impact of climate change. In this way, the countries’ climate policies, strategies, regulations, action plans and actions shall be up to both adaptation and mitigation to help achieve the Paris Agreements and the UN sustainable development goals (SDGs), with sub-policies on several sub-themes: i.e. education, energy, environment, economics, and equality.
The EU member states have developed some of the most comprehensive sustainability legislation worldwide in such sectors as air quality, climate change mitigation, noise pollution, chemicals, green labeling, and water quality. About 80 percent of nature protection and environmental law implemented by member states now comes from the EU. Besides, stringent EU regulation on sustainability affects not only all companies operating within the EU, but also EU companies operating abroad and/or exporting their goods and services. In the long term, this provides strong support for the reputation of both the EU and EU corporations.
More in: “Global trends 2035” prepared by the European Parliament’s Research Service.
For example the European Green Deal with an utmost target of at least 55% emission reduction by 2030 (called “target 55”) has been supported by the states’ legal obligations towards EU’s climate goals; in this way, the EU has become the first major global economy with a comprehensive legislation in this field.
Besides, the EU climate policy includes high climate ambition coped with more social inclusion and fair green transition. With this in mind, the EU presently suggested establishing a new Social Climate Fund to tackle the energy poverty as already about 34 million Europeans are suffering from energy deficiency. Thus, as to the climate change and the nature protection, the EU intends to double its external funding for biodiversity, in particular for the most vulnerable countries as “climate finance is essential for both the mitigation and adaptation.
There is a globally agreed commitment to provide $100 billion a year until 2025 for mitigating climate changes; hence, in the EU the Team Europe will contribute $25 billion per year and additionally € 4 billion for so-called “climate finance” until 2027. Closing the climate finance gap internationally would be a strong European signal for global climate leadership.
As to perspectives, the following two directions in sustainability are becoming visible: a) on a European level – adaptation/transition of the states’ economies to the challenges of the information age, leading to stabile and secure EU; b) globally, it is about “managing orderly evolution” of the global system towards multi-polarity, leading to stabile EU’s global position.
However, internally, the EU’s “climate future” is of developing the low-carbon, circular and digital economies; thus, the “fit for 55 package” will be a core enabler with a dynamic CBAM that complements the ETS and the development of standards that create a sustained demand for low-carbon solutions.
The Commission has published the results of a study analysing the economic impact of Open Source Software and Hardware on the European economy. There are clear signals from investors on the huge value and potential of open source. Policies to maximize the return in Europe of this value may be required. In the short-term, the findings of the study will be used as a basis for policy options in many digital areas. In the long-term, the findings can be used for a new open source policy focused on the EU economy as a whole. More in;
Leading in global circular economy’s patterns
The EU is taking a leading global position concerning circular economy/society issues and implementing global sustainability’s goals, so-called SDGs. Thus, on the initiative of the Finnish government (and Finnish Innovation Fund, Sitra) and government of Canada, arranged the first ever in North America a global forum devoted to issues of circular economy transformations (it takes place in mid-September 2021 in Canada; the first such circular economy forum took place in Finland in 2017; the web link to the event in: https://www.wcef2021.com/
The forum focuses on the actions needed in the next 5 years to raise circular ambition globally. The transition towards a circular economy is already happening in some parts of the world, though the pace is not fast enough, despite its potential in tackling the sustainability crisis and its promise of value creation towards a wealthy and inclusive society. However, more and more countries already recognise the benefits of a circular economy, as circularity offers solutions for clean growth while addressing climate change, pollution and biodiversity loss; hence, t he World Circular Economy Forum offers solutions for this inevitable shift.
The circular economy makes business sense: for example, remanufacturing, refurbishment, reuse and repair of products’ trends in Canada are currently worth about $56 billion annually, and this business supports over 300,000 jobs. A 2018 study by the Material Economics concluded that a more circular economy in the four largest materials in terms of emissions (steel, plastics, aluminum and cement) and two large use segments for these materials (passenger cars and buildings) can cut the emissions from heavy industry as much as 3.6 billion tons per year globally. The extraction and processing of natural resources causes 45% of climate emissions and 90% of biodiversity loss. And global material use is expected to more than double from 2011 to 2060. For a true circular economy, we must redefine that no waste is generated by design. Reference to: https://www.sitra.fi/en/publications/circular-economy-powerful-force-climate-mitigation/.
Unsustainable consumption and production patterns are having negative environmental impacts globally. The circular economy is about moving beyond the current take-make-waste approach to production and consumption and finding new ways to maintain the value of products, materials and resources in the economy for as long as possible. “The circular economy is an essential ingredient of post-COVID-19 economic recovery if we want to succeed in transforming our societies to climate-neutral and less harmful to nature. It will maintain the value of goods without overconsumption of natural resources,” says Jyrki Katainen, President of The Finnish Innovation Fund Sitra. Source: https://www.wcef2021.com/2021/09/10/sitra-worlds-landmark-circular-economy-event-broadens-the-variety-of-solutions-transforming-economies-to-be-more-sustainable/.
European Council President Charles Michel and European Commission President Ursula von der Leyen participated in the sectoral economic issues (September 2021) in the Major Economies Forum on Energy and Climate hosted by the US President.
The EU through a global vision
The EU is going to present a new connectivity strategy called “global gateway” as a partnership with countries around the world aimed at investing in quality infrastructure which would connect globally people, production of goods and services, etc. with a values-based approach, offering transparency and good governance to the EU’s partners.
To make the global gateway’s approach happen (as a globally trusted), the EU will create a “Team Europe” approach to connect management and investment, banks and the business community. The priority would be for the regional summits around the world starting with EU-Africa Summit in February 2022.
However, the EU’s in the world position has been recently seriously damaged: “it was the worst possible day for the EU – and its defense heavyweight France – to learn that they’re not in the geostrategic big league when it comes to countering China’s rise in the Asia-Pacific region”, argued the European Commission. The US and the UK decision to make a deal with Australia is leading to the EU’s exclusion as a European ally and partner like France from a crucial partnership with Australia at a time when the EU is facing unprecedented challenges in the Indo-Pacific region. France and German defense ministers argued that is “over European values and/or respect for a multilateralism based on the rule of law, which signals a lack of consistency which France can only notice and regret”. However, the EU is already a top investor, the leading development cooperation provider and one of the biggest trading partners in the Indo-Pacific region. Besides, the EU is in full cooperation with “the Quad” — the anti-China security alliance of the U.S., Australia, Japan and India.
Europe’s top concern in the global affairs is not in confronting China: France, Germany, Italy and Spain repeatedly declined invitations from the US administration to team up against Beijing, and instead has sought to boost economic ties with China; the message couldn’t be clearer: the EU does not want to pick a side in the US-China conflict.
It is the European vision that the EU member states’ societies shall be built on democracy, common values and trust in governance. In this way the new ideas can be formed, various changes happen and injustices can overcome; trust in these common values brought various facets of European integration together. These values united the freedom fighters that tore down the Iron Curtain over 30 years ago; as the “great European values” are coming from European cultural, religious and humanist heritage being part of “European soul”.
To a certain degree, European values are guaranteed by the Union’s legal order and are safeguarded by the binding judgments of the European Court of Justice with a due respect in the member states. As protecting the rule of law is not just a noble goal, it is as well a hard work and a constant struggle for improvement; the EU’s rule of law has become an integral part of the European integration process: the Commission recommends that from 2022, the rule of law reports will come with specific recommendations to the EU member states.
General reference and source – Commission President’s speech at: https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_21_4701