The EU unveils its economic security strategy, targeting China

THE European Commission today unveils its strategy to deal more aggressively with the risks to what it defines as financial security, which is mainly aimed at China.

The president of the European Commission, Ursula von der Leyen, had referred in March, during her speech on EU/China relations, to potential restrictions on some investments or key exports.

Serious measures have already been adopted. The European Union approved in early June the creation of a common tool to punish any country that uses economic sanctions to put pressure on any of its member states, as is the case with China against Lithuania.

Other measures have been proposed, such as strengthening the filtering of foreign investment in the EUthe imposition of controls on key investments and controls on non-EU investments that pose a risk of technology leakage, according to a diplomatic source.

“We must ensure that the capital, experience and know-how of our businesses are not used to enhance the military and espionage capabilities of those who are also our systemic adversaries,” Ms von der Leyen had insisted.

The strategy presented today, which the Commission does not explicitly describe as a response to Beijing, refers to economic risks facing the EU and possible solutions to address them.

This plan, which is far removed from the usual European approach of free trade and openness to global competition, raises concerns in member states, which foresee a rise in protectionism. However, the actions proposed by the European Commission will be “proportionate, specific and targeted”, a European source clarified.

The novel coronavirus pandemic, which has paralyzed supply chains in Asia to the extent that it has put the European car industry in difficulty, as well as geopolitical tensions around China, have changed perceptions in the EU.

Europeans realized the need to fight against their addictions, especially regarding the active substances of drugs, semiconductors, metals necessary for the energy transition.

“Let’s stop being naive”

China and the US are closing. We must stop being naive. We must protect ourselves” said a European diplomat on condition of anonymity, pointing to the growing number of Chinese electric cars being sold in the EU as an example.

Brussels wants to forge its own position vis-à-vis Beijing, despite pressure from the US to toe its own hard line.

Some EU member states are expressing concern that a trade war with China could break out, while others are saying it is time to act to protect European economic security.

“If we assess the risks from a European perspective, the dividing lines are drawn either in Beijing or in Washington,” said Commission Vice President Margrethe Vesteyger during a press conference in May.

For the president of the European Commission, Europeans must “focus on reducing risks and not on distancing”. China, a trading partner “out of nowhere”, is also characterized as an absolutely necessary ally in the fight against climate change.

The EU also wants to capitalize on the lessons learned from Russia’s invasion of Ukraine, which exposed its excessive dependence on Russian fossil fuels – oil, gas, coal – and forced it to look for other resources.

BusinessEurope (Confederation of European Enterprises), the voice of the employers of the Old Continent, however, called for the interests and competitiveness of Europe to be “carefully” taken into account “before applying further restrictions on exports of goods and technologies and investment flows”.

The EU “must find the right balance between protecting its security interests and maintaining an environment conducive to trade and investment,” he insisted.

European leaders are expected to discuss the Commission’s proposed European security strategy in Brussels next week.