Last week, the European Commission published its new Economic Security Package, outlining six areas of geoeconomic risk. At an event at the European Policy Centre on 9 December, Denis Redonnet, Deputy Director-General at DG Trade and Economic Security, made clear that the package is meant to provide policy direction, not lay the basis for hard regulatory demands.
The Commission’s approach to economic security has been risk-based until now and will continue to be so. As Redonnet acknowledged, it’s hard to shore up support from all the EU27 for tough policies when there are still diverging opinions on whether there even is a problem to act on. The bloc needs to “converge on the understanding of the risks,” said Redonnet.
Nonetheless, risk assessments undertaken by the Commission have not been entirely adequate. They have tended to be too slow, not granular enough and prone to overlook certain risks. Redonnet himself pointed to the Nexperia crisis, which has been “a sobering experience” and “led to some robust discussions” in Brussels.
To catch risks like these, information gathering on value chain vulnerabilities must move closer to the source, he said. The Commission is too many steps removed from where the action is to pick up every risk, and businesses may not be willing to share the detailed – and often sensitive – information needed. Through an enhanced network of National Economic Security Advisers, the Commission hopes to solve this problem.
While Redonnet emphasised the need for information and risk assessments to get economic security policy right, others were more impatient. “Europe is deindustrialising faster than it is derisking,” said Bart Groothuis, a liberal Member of the European Parliament.
There is no time to slow-walk policymaking, Groothuis emphasised. Demand-side policies, such as price floors and off-take guarantees, are needed to create domestic markets for key resources like rare earths, he continued, while lamenting that concrete policies like these were not a part of the Package or the RESourceEU plan put out at the same time.
Europe is being dually coerced by the US and China, and policy action must rise to the urgency of the situation. The main issue is our military weakness, which leaves us open to US pressure, said Groothuis. Action on economic security must also be larger than EU-only, drawing in allies in Europe like the UK.
In the end, “the cost of confrontation is high, but the cost of inaction is higher,” said Groothuis.
One area in dire need is the European chemicals industry. As Redonnet made clear, “chemicals are infrastructural to the rest of the economy,” being used as inputs in a wide array of downstream industries. While not bringing any new trade policy proposals to the table, Redonnet compared the situation to that in the steel markets. Here, the EU recently imposed what Redonnet called an “ad-hoc measure” reflecting the spiralling situation, which he called “out of control.”
From the business side of the discussion, both Cristoph Luykx of IMEC and Ingvild Stub of Equinor underlined the need for clarity on rules and procedures from the Commission, especially on which vendors are considered risky or not. In the Economic Security Package, the Commission says it will ramp up dialogue with key industries, which may alleviate worries like these.
