Of the ten critical technologies identified by the European Commission, advanced semiconductors, artificial intelligence, quantum computing, and biotechnologies are the four selected to undergo a risk assessment, as announced on October 3.
The European Commission and European External Action Service presented the EU’s economic security strategy in June 2023, which introduced “a framework for a robust assessment and management of risks to economic security at EU, national and business level while preserving and increasing our economic dynamism.” As the 2024 European elections approach, a potential shift in the Commission leadership is on the horizon, which means the implementation of the economic security strategy – along with new policies, fine tuning of old ones and the risk assessment – have been fast-tracked to the last quarter of 2023.
The strategy presented a three-pillared framework of “protect, promote and partnership” and a series of policies within each pillar. The “protect” pillar is where the EU has been making tangible progress and where most of the changes will occur this autumn.
An expansion of the list of items of “annex I” of the 2021 EU regulation of export controls is to be expected not only as a result of the risk assessment but also as result of a growing number of member states that follow the Dutch approach of expanding the national list of items subject to export controls.
It is not entirely clear if the list of critical technologies and the following risk assessment will have an impact on the review of the EU’s inbound investment screening regulation, but considering the EU was in search for a holistic approach, it is not unlikely. In fact, the list and assessment will provide the basis for discussion of a potential screening of outbound investments that should happen by the end of the year.
Setting it apart, the European Commission has initiated a case against Chinese electric vehicles based on the anti-subsidy element of the EU's trade defense instruments (TDIs). Resulting from neither the list of critical technologies, nor the risk assessment, the case seems to be a renewed effort deriving from a more traditional set of instruments that seek to level the playing field with China and prevent market distortions. This is particularly notable as neither list includes technologies essential for the green transition.
The risk assessment will dictate the development of many of the economic security policies as – in theory – it should highlight areas where the risk to EU economic security is currently satisfactory, requires expansion of existing policies (i.e., export controls) or potentially a rethinking and re-sizing of what the EU has already detailed.
The risk assessment is likely to indirectly show that China is a core concern when it comes to all four of the risks identified by the economic security strategy: risks to the resilience of supply chains, risks to physical and cyber security of critical infrastructure, risks related to technology security and technology leakage, and risks of weaponization of economic dependencies or economic coercion.
Focusing policies directly on China might seem easier than undergoing a lengthy risk assessment. However, there are three main reasons why this is likely not the best approach.
First, with regard to future-proofing the implementation of the EU’s economic security strategy, China is likely to remain a main area of concern. Although, much like the anti-coercion instrument originating out of concerns related to the US Trump administration and consequently pivoting focus to China, policies born out of concerns linked to China can be applied to other actors if they threaten the EU’s economic security.
Second, targeting China explicitly would face opposition and a lack of buy-in from member states. The implementation of most economic security policies lays with member states and as such, implementation proving already difficult as it is – could evolve into a China issue and implementation would ultimately become that much more difficult with little to no advantages.
Finally, the beauty of a risk assessment is that it can unveil risks that had not been identified before, therefore uncover the need for action, but it can also show that risks that were thought to be large and likely to occur are instead quite manageable – mostly regarding the bilateral relationship with China.
Economic security will continue to occupy an important role in the EU–China agenda this autumn, and the risk assessment may provide just the right basis for balancing the EU’s position. Risk assessments are not an exact science, but being able to communicate EU concerns on the basis of an assessment rather than geopolitical competition may lead to a long sought after increased unity in the EU’s position towards China.