The European Union is in a moment of reflection, as it considers how it remains competitive as a single market, within the context of a volatile geopolitical environment. The European Commissioner for the Internal Market, Thierry Breton, has outlined his thinking for the EU’s role on the global stage in a speech this week.
The speech feels particularly pertinent given the challenges facing the EU at present - front of mind being the recovery from the COVID-19 pandemic, the disruption to global supply chains, soaring inflation and Russia’s invasion of Ukraine. The European Commission is also clearly thinking about how it engages in the future with dominant international players, such as the US and China.
The general tone of the speech is that the EU is no longer going to play second-fiddle to standards set out by other trading nations and that, given its scale, it has the ability to lead in a number of areas.
Breton outlined how world geopolitics has undergone major fragmentation over a short period of time, with an increasing economic dominance of China, a changing transatlantic relationship, and growing pressures on democratic values across the globe.
In addition to this, the world has gone through a period of perpetual crisis. Breton said:
But while Russia has tried to weaken the European Union, the effect has been the opposite.
In the field of energy, we are more resolute than ever to “decouple” from Russia, without self-isolating. We are diversifying our suppliers, speeding up our transition to green energy sources, and preparing a structural reform of our electricity market.
In defence, Europe is making great strides. We are finally making up for years of under-investment. Over the last twenty years, EU combined spending on defence increased only by 20%, compared to 66% in the US, nearly 300% in Russia and 600% in China! And it's not only about investing more, but also about investing better by buying together.
In technology, we have recognized that a global race is taking place and that our capacity to take our destiny into our own hands boils down essentially to the mastery of tomorrow's technologies. Breakthrough digital, dual and green technologies are becoming an essential driver of our resilience. Data, chips, quantum, hydrogen, batteries – these are key transformative technologies that we need to invest in for the real industrial revolution to happen.
Breton added that the EU’s dependencies in areas like energy and raw materials weaken the market economically and politically and that it needs to rethink supply chains from an environmental and social point of view. He said:
It is time that we confront our paradoxes, where we pursue an ambitious Green Deal yet prefer to source lithium in Chile, process it in China and then have it shipped back to Europe, rather than investing in smart mining and processing in our back yard. Or where global shipping emissions represent close to 4% of our emissions in Europe, and carbon in transit (resulting from supply chains) represents up to 10% of global emissions.
Given our commitment to fight climate change and protect our environment, it is difficult to conceive how we can maintain a model driven by greed where our citizens consume goods produced unsustainably or in countries that make us vulnerable.
We need secure and sustainable supply chains.
A self-assured EU
It has been a challenging few years for the EU, with a surge in right-wing populism threatening the fundamental principles of the EU’s federated approach to governance. You only have to look at Brexit and the UK as an example of how given the opportunity, things can quickly fall apart for EU unity.
However, that being said, the COVID-19 pandemic and the war in Ukraine have gone some way to not only calm the anti-EU rhetoric, but build on the belief that the member states are ‘stronger when working together’.
Breton said that Europe’s openness is deeply entrenched in the EU’s DNA, but added that the European Union needs to harness globalization differently. In that it needs to be “more assertive and less naive” in defending its economic interests and values. Breton said:
More self-assurance, to begin with, regarding our strengths and our attractiveness as the first democracy and the world's largest single market. We have incredible assets in Europe: highly qualified engineers, excellence in research, quality infrastructure, a solid manufacturing base and a strong services sector.
Some will make us believe that Europe lags behind in tech. Well, one of the companies with the highest market caps is sitting right here, and it's European [ASML].
Some will tell us that we should focus on research or produce well-established technology, and leave the commercialisation of ground-breaking advanced technology to others. Well, I say we have the vision and the means to lead on the markets of the future!
More self-assurance, secondly, regarding our ability to set our own rules of the game. I firmly believe that if we want to lead in the technological race that is taking place, we have to set our own rules and standards, and not just accept the choices of others. Let me reassure you, my approach will always be to regulate as little as possible, as much as needed. But if we remain an open continent, it needs to be on our terms, with us in the driving seat.
Breton is calling on the EU, and member states, to ‘establish a balance of powers’ globally, where he cited how the US blocked vaccine supply chains during COVID-19 because of the “America First” principle. He said he wants to build leverage and a balance of powers so that the EU never gets “caught off guard”.
Much of this will come down to how supply chains form over the coming years. Breton said:
Europe must now be ready for what I call the geopolitics of supply chains. Of course, globalization, through trade and cooperation, is a source of knowledge, innovation and progress. But it also presents risks, which have to be anticipated and addressed when needed. That is why in preparing the Chips Act, the Single Market Emergency Instrument and the Raw Materials Act, we have looked closely at what our like-minded partners have put in place.
Since I am quoting a number of wise Europeans, allow me to refer to a recent interview you gave, dear Micky [Minister Adriaansens], in which you very rightly said: “What once was is no more. We are just being overtaken by other great powers, at some point you have to move with what is happening. That is not protectionist. I prefer to speak of healthy realism.”
This is also my vision. A more assertive Europe that looks after its own interests, that is a credible partner and builds bridges with other powers of the world as equals, with something to bring to the table.
That will be our approach with global powers like the US and China of course, as well as with regional actors such as Africa and Asia.
And this assertiveness will also remain our mantra as we redesign our relationship with other individual countries surrounding the EU that seek to retain global influence, namely the UK and Turkey.
Breton finished his speech by calling on member states to focus on solidarity to achieve these aims. He said that the EU does better when it stands together and the member states must take responsibility to implement all the measures being laid out. This speech is interesting because it feels like it's laying the foundation for how the EU is going to approach policy and international cooperation going forward. It appears we are moving into a period - unsurprisingly - where protectionism and shared values dictate the new rules of play. The challenge for the EU is driving a message of sovereignty and self-assuredness, whilst convincing member states that this only works at an EU-level - rather than an individual state level.