Members of the European Union should think twice before selling sensitive advanced technology to countries seeking to „undermine international peace”.
Exports of cutting-edge products such as quantum computing, semiconductors and artificial intelligence deserve more scrutiny. That’s the view of the European Commission, which presented its first economic security strategy on Tuesday. „We are considering limited and small-scale advanced technologies and we want to make sure that they do not enhance the military capabilities of some countries that concern us,” explained European Commission President Ursula van der Leyen. During a speech.
Although van der Leyen insisted that the strategy was „neutral” and respected the free market, it soon became clear that its main target was China, the world’s second-largest economy and one of the bloc’s main trading partners.
Van der Leyen pioneered the concept of de-risking in dealing with Beijing, which is supposed to fall somewhere between close engagement and total distancing. The term, first introduced in a keynote speech at the end of March and later endorsed by the G7 in Hiroshima, reflects its growing appeal.
The strategy released on Tuesday can be seen as an attempt to clarify what „risk reduction” actually entails in practice. „Given the dynamic nature of the risks, we now need a strategic vision of how we are going to deal with them,” van der Leyen explained.
EU-China relations have taken a hit over the past year as a result of Beijing’s continued refusal to condemn Russia’s invasion of Ukraine, belligerent rhetoric around Taiwan and trade retaliation against Lithuania, as van der Leyen described earlier. An „apparent merger” of the country’s military and commercial sectors.
But despite the number of sticking points, some essential products like solar panels, batteries and rare earths will depend heavily on China to thrive in the 21st century.
Brussels worries that these deep-seated biases could turn against the bloc and damage the entire European economy if relations deteriorate further or armed conflicts break out in the South China Sea. A dire situation that has its roots after Russia’s invasion of Ukraine, when the Kremlin disrupted its gas pipelines in retaliation for Western sanctions.
Lessons learned from the Covid-19 pandemic, which left rich countries scrambling for key supplies like masks and hand sanitizers, are strongly echoed in the new strategy.
„Many issues (…) have revealed inherent vulnerabilities in our economies. And they have opened our eyes to the growing – and increasingly complex – risks to national security and economic resilience,” van der Leyen explained to the press.
„The world has become more competitive and geopolitical.”
Greater coordination and oversight
A non-binding economic security strategy has three main objectives: fostering Europe’s competitiveness, protecting Europe from potential risks, and partnering with allies to diversify European supply chains.
The second objective – security – is arguably the central element of the 14-page document, and focuses on key threats to Europe’s supply chains, critical infrastructure, technology and economic coercion.
The strategy does not propose to ban or restrict the export of any specific products, which would be the exclusive competence of Member States. Instead, the Commission brings together a range of policy instruments – existing and upcoming – to help governments improve their monitoring of sensitive technology sales and foreign investment flows.
The community administrator plans to issue a general list of dual-use technologies that can be used for both military and civilian purposes in September. .
A preview of this debate came earlier this year, when the Netherlands took action to block the sale of ultra-advanced semiconductor manufacturing machinery for the Chinese market. The decision, aimed at avoiding „unintended consequences”, drew applause from Washington and condemnation from Beijing.
Following the Dutch case that perfectly summed up the geopolitical challenges of technology race, the Commission calls for closer and faster coordination at EU level to avoid a landscape of unchecked barriers and restrictions.
„An uncoordinated proliferation of Member States’ national regulations creates loopholes and undermines the integrity of the single market,” the strategy says. „Possible differences between member states would weaken the economic security of the EU as a whole.”
In addition to exports of goods, Brussels wants to strengthen monitoring of investment projects involving countries that „use civil-military fusion strategies”, namely China.
The Commission already has the legal instruments to supervise foreign investments entering the group and foreign acquisitions of national companies. Now he wants a new tool to monitor investments from the EU to other countries where secrets and technical know-how could be leaked or stolen. „Outbound investment is to ensure that the capital of European companies, their knowledge, their experience, their research, is not misused by countries concerned about their military use,” Van der Leyen explained, promising to present a legislative proposal. Before the end of the year.
However, the idea of capping overseas investment is highly controversial and faces an uphill struggle to get off the ground. While European companies respect their freedom to do business, it is not yet clear how the Commission can monitor or block the corporate decisions they make.
The first reactions to the strategy will come when EU leaders meet for a two-day summit in Brussels next week. Discussions are expected to be intense as governments have traditionally been reluctant – or outright opposed – to European institutions interfering in aspects of national security.
Tobias Gehrke, head of the European Council on Foreign Relations (ECFR), welcomed the Commission’s report and selection of potential risks, but said it did little to address the „great power race for techno-industrial leadership” between China and the United States. In the states.
„The EU’s division between trade instruments controlled by the European Commission and defense instruments controlled by member states is inappropriate at a time of technological and industrial competition where economic security and national security are intertwined,” Kerk said.