In a bold move aimed at safeguarding European economic security, the European Union (EU) is planning to ban European companies from manufacturing sensitive technologies such as supercomputers, artificial intelligence, and advanced microchips in countries known for their autocratic regimes, particularly China. The European Economic Security Strategy, unveiled by Commission President Ursula von der Leyen, signifies a significant shift in how the EU intends to intervene in European companies’ global investments and trade.
While the document does not explicitly mention China, it is evident that Beijing, along with Russia, is the primary focus of this strategy. EU competition chief Margrethe Vestager clarified that the approach is “country agnostic” but emphasized the use of a “geopolitical filter” when assessing risks. Vestager stated, “We cannot treat supply dependencies on a systemic rival the same as we would treat the dependency on an ally.”
The EU’s move aligns with discussions held during the G7 summit last month, where “de-risking” from China emerged as a key topic. Japan has already implemented a similar strategy, but von der Leyen underscored that “Europe becomes the first major economy to set out a strategy on economic security.” However, she also acknowledged China’s significance as a partner in addressing global challenges such as climate change, affirming that most trade and economic relations with China will continue unaffected.
Josep Borrell, the EU’s foreign affairs chief, clarified that the EU is not adopting a confrontational stance towards China. Nevertheless, the strategy aims to bolster EU control through three key areas: inbound investment screening, export controls, and outbound investment screening. The most contentious area is outbound investment screening, which would grant the EU new powers to control the outsourcing of critical industries and technology to potentially problematic countries. This legislative measure aims to prevent companies from relocating supply chains for “advanced technologies” to autocratic nations that pose security risks to European intellectual property and national security.
Tobias Gehrke of the European Council on Foreign Relations think tank highlighted the inadequacy of the EU’s current division between trade instruments controlled by the European Commission and security instruments controlled by member states. He asserted, “The EU’s division between trade instruments controlled by the European Commission and security instruments controlled by member states is increasingly inadequate in the face of technological and industrial rivalry where economic security and national security are intertwined.”
The strategy specifically highlights quantum computing, artificial intelligence, and advanced semiconductors as areas where the EU intends to restrict outsourcing. However, the proposal is still subject to debate, as several EU countries express concerns about the potential impact on the EU’s investment climate and Brussels’ overreach. It is evident that caution and reflection are necessary before deciding on the next steps.
Businesses also approach the proposal with skepticism, urging a careful assessment and targeted approach. Industry organization Business Europe emphasized that outbound investment restrictions should only be used as a last resort when serious security concerns are substantiated.
The EU executive plans to finalize the new initiative by the end of the year, although the exact form—whether a legislative proposal or a stepping stone towards a concrete instrument—remains undetermined until the next Commission is formed after the European Parliament elections in a year’s time.
This EU economic strategy, with its implications for China and other potential adversaries, serves as a significant development in Europe’s effort to safeguard its economic and national security. It illustrates the EU’s determination to proactively protect sensitive technologies and prevent undue influence from autocratic countries, while also recognizing the importance of continued cooperation in addressing global challenges. As the EU takes the lead in formulating an economic security strategy, it sets a precedent for other major economies to follow suit and strengthen their own defenses in an increasingly complex geopolitical landscape.