The EU is the biggest export-import region: on the global scene, it is exporting over €3.1 trillion in goods and services and importing €2.8 trillion yearly. However, at a time of profound geopolitical turmoil and rapid technological changes, there are serious threats about the risks involved. During several last years the EU has learned some hard lessons about the risks of excessive dependence and proper management.
In June 2023, the Commission initiated additional steps and presented the European economic security strategy (EESS) aimed at increasing the member states’ capacity to assess risks and vulnerabilities, as well as addressing them in a proportionate and targeted way.
The EU-wide measures included efforts to remedy existing vulnerabilities by promoting, protecting and partnering risk management. In sum, it included, building on the EU’s strengths, activating partnerships around the world, staying open to trade and investment, as well as defending and protecting the EU interests and values. The member states governance will have to work hard to put this strategy into effect.
More on EESS in: https://ec.europa.eu/commission/presscorner/detail/en/IP_23_3358
European economic security strategy: the concept
The EESS focuses on minimizing risks arising from certain economic flows in the context of increased geopolitical tensions and accelerated technological shifts, while preserving maximum levels of economic openness and dynamism.
Comprehensive approach to protect the Union’s economic security includes three main directions: foreign direct investment (or FDI screening), export control and outbound investments.
Perspective new cooperative EU-states actions and measures in EESS will be composed of the following elements:
= developing with the states a framework for assessing risks affecting the EU’s economic security; this includes establishing a list of technologies which are critical to economic security and assess their risks with a view to devising appropriate mitigating measures;
= engaging in a structured dialogue with the private sectors to develop a collective understanding of economic security and encourage them to conduct due diligence and risk management in light of economic security concerns;
= further supporting the EU-wide technological sovereignty and resilience of the Union’s value chains, including by developing critical technologies through Strategic Technologies for Europe Platform (STEP);
= reviewing European Foreign Direct Investment Screening Regulation;
= exploring options to ensure adequate targeted support for research and development of dual-use technologies;
= fully implementing the EU’s export control regulation on dual use items and make a proposal to ensure its effectiveness and efficiency;
= examining (together with the member states governments) those security risks that can result from outbound investments and on this basis propose additional yearly initiatives;
= proposing measures to improve research security to ensure systematic and rigorous enforcement of the existing tools and identifying and addressing any remaining gaps;
= exploring the targeted use of the Common Foreign and Security Policy’s instruments to enhance EU economic security including Hybrid and Cyber Diplomacy toolboxes and foreign information manipulation and interference toolbox;
= instructing the EU Single Intelligence Analysis Capacity to work specifically on the detection of possible threats to EU economic security;
= ensuring that the protection and promotion of EU economic security is fully integrated in the Union’s external actions and intensifying cooperation with third countries on economic security issues.
Source: https://ec.europa.eu/commission/presscorner/detail/en/speech_24_404. Additionally in a joint communication at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52023JC0020&qid=1687525961309
Comprehensive approach to risk management
Present geopolitical and technological situation is rapidly affecting the EU-wide socio-economic security. Hence the need for additional -and often quite new- measures to identify, access and manage expected and already apparent risks.
For example, assessment of risks to economic security proceeds in four areas: – risks to the resilience of supply chains, including energy security; – risks to physical and cyber security of critical infrastructure; – risks related to technology security and technology leakage; and – risks of “weaponization” of economic dependencies or economic coercion.
Beside, the process of mitigating identified risks proceeds through a triple-type approach, including:
= promotion of the EU-wide competitiveness by strengthening the Single Market, supporting national strong and resilient economy, as well as investing in skills and fostering the Union’s research, technological and industrial base;
= protection of the EU’s economic security through both a range of existing policies/tools and considering new measures in addressing possible gaps. This would be done in a proportionate and precise way that limits any negative unintended spill-over effects on the European and global economy; and
= partnering with the broadest possible range of states and bodies outside the EU to strengthen economic security, including through furthering and finalizing trade agreements, reinforcing other partnerships, strengthening the international rules-based economic order and multilateral institutions, and investing in sustainable development.
References and citations to: https://ec.europa.eu/commission/presscorner/detail/en/IP_23_3358.
European economy: types of risks
The EU institutions have identified the following four types of risks:
1. Risks to the resilience of supply chains, including energy security: risks of price surges, the unavailability or scarcity of critical products, or inputs in the EU, including but not limited to those linked to the green transition, those needed for a stable and diversified energy supply and pharmaceuticals.
2. Risks to the physical and cyber-security of critical infrastructure: risk of disruptions or sabotage of critical infrastructures, such as pipelines, undersea cables, power generation, transportation and electronic communication networks, that undermine the secure and reliable provision of goods and services or data security in the EU.
3. Risks related to technology security and technology leakage: risk to the EU’s technological advancements, technological competitiveness, and access to leading-edge technology, including through malicious practices in the digital sphere such as espionage or illicit knowledge leakage In some cases, technology leakage risks strengthening the military/intelligence capabilities of those that could use them to undermine peace and security, especially for dual-use technologies such as Quantum, Advanced Semiconductors or Artificial Intelligence, and therefore require specific risk mitigation measures.
4. Risk of weaponization of economic dependencies or economic coercion: risk of third countries targeting the EU-27, the member states and the EU-wide businesses through measures affecting trade and/or investment to bring about a change of policy falling within legitimate policymaking space.
Reference to: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52023JC0020&qid=1687525961309
More in the Commission’s weblinks: = Communication: advancing European economic security: an introduction to five new initiatives; = Proposal for a Council Recommendation on enhancing research security; = White Paper on options for enhancing support for research and development involving technologies with dual-use potential; = White Paper on export controls; = White Paper on outbound investment; and = Proposal for a new regulation on the screening of foreign investments.