Protecting our own economy a little better – hardly anyone in Europe is against that anymore. But does that also impede ‘the VOC mentality’?
It is one of the questions hanging over the market this Thursday and Friday, when European heads of government come to Brussels. One of the topics of discussion: economic security, a concept that has recently risen rapidly to the top of the Brussels agenda.
It means something like: avoid becoming too vulnerable and dependent. During the corona crisis, Europe became painfully aware of shaky supply chains when it came to, for example, face masks or vaccines. After the invasion of Ukraine, Russia virtually halted gas supplies to Europe, with major consequences for EU economies. But, politicians admit, it is mainly China, increasingly openly hostile, that poses the greatest risks to the European economy.
However, the question of how to make it more resilient still leads to disagreement. For example, should European companies be inhibited from moving their production abroad? That suggestion alone makes trade champion the Netherlands prance.
Nevertheless, the discussion about it is open in Brussels. Last week, Ursula von der Leyen made a first move, with a fourteen-page ‘economic security strategy’. Above all, said the President of the European Commission, “global integration and open economies are a positive force for Europe”. But, she added: “We also see that the world has become more competitive and geopolitical.”
It means, among other things, von der Leyen said, that a number of “key technologies can be used aggressively.” For example chips, or raw materials that are crucial for the energy transition. And so Europe needs a ‘strategic vision on how to deal with these risks’. Von der Leyen has not yet come up with very concrete measures – these must follow from risk analyzes and discussions among member states.
Towards more protectionism
In recent years, the focus in Brussels has already clearly shifted towards more protectionism. New opportunities emerged to prevent unfair competition, to screen foreign investment in Europe and to retaliate if a country intensifies economic pressure for undue reasons. All focused first and foremost on one country: China (although the country was not mentioned in the strategy or in Von der Leyen’s explanation).
Europe has already carefully armed itself in this way, for example by preventing China from installing 5G. But now that the tension between the United States and China remains high, according to Brussels, more is needed. Also because it is now more than clear that Europe cannot completely stay out of this battle – see, for example, the successful American pressure on the Netherlands to impose export restrictions on ASML.
Most controversial is the suggestion put forward by von der Leyen to screen how many European companies invest abroad. For the time being, the Commission only wants to investigate the possibility of doing so. But ultimately it could mean that in the future Brussels will prevent companies from moving the production of certain technology to problematic countries – China in the lead.
‘Largest Investors’
The Netherlands, among others, is watching this discussion with suspicion. “In many countries, the Dutch are one of the largest investors,” said Minister Liesje Schreinemacher (Foreign Trade, VVD) recently during a visit to Brussels. “So it’s important for us to keep a finger on the pulse.” In the House of Representatives, the VVD expressed concerns on Wednesday that “the French are seizing the justified concerns about economic security to turn into protectionism”.
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The Netherlands is not alone in its reticence. Large countries Germany and France are also wary, as are the main business lobby clubs in Brussels. Partly because a central, European screening of both investments from external countries in the EU and from European companies to the outside world would place more power in Brussels. This is necessary, the Commission emphasizes, because the EU is stronger together and you have a better overview from Brussels of all individual investments that are made. But member states are not keen on handing over that power just like that.
In the end, member states and companies mainly fear the economic consequences of increasing abrasion. Their argument: it is precisely economic prosperity through companies that operate globally that benefits Europe the most.
In a press conference last week, European Commissioner Margrethe Vestager (Competition) emphasized that it is precisely the analysis of risks that is important for maintaining good international relations. “If we don’t do it, we don’t know what is risky and everything will look unsafe. And that then leads to chilled trade relations. Moreover, we also want to cooperate with China in many areas, for example in combating climate change.”
Anyway, there is no final conclusion this week. At the end of this year, the European Commission wants to come up with a proposal for export screening. In Brussels, it is acknowledged that views have already shifted considerably in recent years. No one rules out the possibility that this will eventually become possible.