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1. How DeepSeek has changed artificial intelligence and what it means for Europe

Author:
Bertin Martens
Publication Date:
03-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
By mid-2024, artificial intelligence large language models (LLMs) were running into diminishing returns to scale in training data and computational capacity. LLM training began to shift away from costly pre-training to cheaper fine-tuning and allowing LLMs to ‘reason’ for longer before replying to questions. Fine-tuning uses chain-of-thought (CoT) training data that includes questions and the logical steps to reach correct answers. This increases the efficiency of learning for smaller AI models, such as DeepSeek. CoT data can be extracted from large ‘teacher’ LLMs to train small ‘student’ models. These changes shift the cost structure of AI models from high pre-training costs to lower fine-tuning costs for model developers and more inference costs for users. While smaller models are cheaper to use, a positive AI demand effect is likely to exceed the negative price effect. Price competition between models will increase, resulting in tighter margins for AI firms. Specialised models can still fetch premium prices. Cheaper LLMs are an opportunity for European Union companies to catch up in building smaller AI models and applications on top of LLMs. Increased demand for AI services will require more investment in computing infrastructure, including in the EU. Investing in large LLMs and the corresponding hyperscale infrastructure is riskier, especially as price competition between models increases. Knowledge extraction between AI models puts pressure on model developers to protect their investments against free-riding by others. It also creates a dilemma for policymakers: should they favour free-riding to promote competition and innovation, or should they clamp down and reinforce monopoly rents to stimulate investment in AI models? Past policy will not be an appropriate response in a world that offers vastly expanded opportunities for knowledge pooling and innovation at lower cost.
Topic:
Science and Technology, European Union, Economic Policy, Microeconomics, Innovation, Artificial Intelligence, Large Language Models (LLMs), and DeepSeek
Political Geography:
Europe

2. Instruments of economic security

Author:
Conor McCaffrey and Niclas Poitiers
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Geopolitical and economic developments, including Russia’s invasion of Ukraine and trade disruptions during the COVID-19 pandemic, have raised concerns about the European Union’s exposure to hostile countries. The challenge of improving European economic security (which we narrowly treat here as exposure to foreign trade or production shocks) has grown in importance, with various relevant policy measures introduced at EU level. Focusing in particular on the threat posed by economic coercion, this paper begins by assessing the nature of this threat, before outlining two lessons that can be drawn from two recent instances of this coercion in action: China’s actions against Lithuania and Australia respectively. First, while much of the policy debate has focused on imports, the threat to EU exporters should not be ignored. Second, while coercion may not cause any macroeconomically significant harm, this may mask severe impacts on the targeted industries, which should be considered in any policy responses. The EU has significantly added to its policy tools in this area, though some of the instruments introduced under the umbrella of economic security go beyond the definition we consider. An effective response should be built around: building a deeper understanding of the risks facing the EU; improving diversification of both exports and imports; using targeted industrial policy in the limited sectors where the risks warrant intervention; and managing and limiting the fallout of any shocks using ex-post instruments.
Topic:
European Union, Economic Policy, Economic Security, and Coercion
Political Geography:
Europe

3. Nuclear arms control policies and safety in artificial intelligence: Transferable lessons or false equivalence?

Author:
Eoin Micheál McNamara
Publication Date:
01-2024
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
Multiple nuclear arms control treaties have collapsed in recent years, but analogies associated with them have returned as possible inspiration to manage risks stemming from artificial intelligence (AI) advancement. Some welcome nuclear arms control analogies as an important aid to understanding strategic competition in AI, while others see them as an irrelevant distraction, weakening the focus on new frameworks to manage AI’s unique and unprecedented aspects. The focus of this debate is sometimes too narrow or overly selective when a wider examination of arms control geopolitics can identify both irrelevant and valuable parallels to assist global security governance for AI. Great power leaders frequently equate AI advancement with arms racing, reasoning that powers lagging behind will soon see their great power status weakened. This logic serves to intensify competition, risking a spiral into more unsafe AI practices. The global norm institutionalization that established nuclear taboos can also stigmatize unethical AI practices. Emphasizing reciprocal risk reduction offers pragmatic starting points for great power management of AI safety. This research is part of the Reignite Multilateralism via Technology (REMIT) project, funded by the European Union’s Horizon Europe research and innovation programme under Grant Agreement No. 101094228.
Topic:
Defense Policy, Arms Control and Proliferation, Cybersecurity, Economic Policy, Artificial Intelligence, and Strategic Competition
Political Geography:
Russia, Europe, and United States of America

4. Centralization in National High-Performance Sports Systems: Reasons, Processes, Dimensions, Characteristics, and Open Questions

Author:
Wolfgang Maennig
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Chair for Economic Policy, University of Hamburg
Abstract:
Centralization provides for the bundling of tasks that are relevant to the achievement of an institution's goals. Centralization is discussed in almost all areas of life: For example, in politics (more centralized structures in France vs. more decentralized structures in Germany), in economics (centrally planned organization as in the former COMECON-Countries), decentralized decision-making at the individual level in market economies), and at the corporate level. Objects of centralization can be, for example, decision-making processes, products, personnel and customer groups. In some cases, the aim is to centralize (only) certain objects, while other activities are to remain decentralized, for example. In some cases, centralization in some areas virtually necessitates decentralization in others: For example, centralization by product usually leads to decentralization by sales area. Synergy effects, specialization advantages and, ultimately, cost degression effects are cited as benefits or advantages of more centralization; duplication of work and infrastructure can be avoided. Decision-making processes can be accelerated and simplified – subordinate or geographically distant units do not participate in the decision-making process. Unified concepts and strategies can be better enforced. “Density effects" must also be taken into account: There often are positive spill-over effects between people with related activities, for example, due to imitation and learning effects, but also due to the exchange of experience, which leads to an increase in the productivity of those involved. However, the decentralization tendencies that have emerged as a result of the Corona pandemic, for example through homeworking, partly question this finding. One of the disadvantages of centralization is that large centralized companies have high demands on information and decision-making systems because the experience, problems and ideas for solutions that arise decentrally have to reach the decisionmakers and therefore often (but not always) react more slowly to external changes. Less consideration may be given to regional peculiarities. Due to the standardization usually associated with centralization the scope for adaptation to specific circumstances may be lost. Centralization can increase the distance of decision-makers from "grassroots" concerns. The non-central units can suffer from devaluation, delegitimization, and demotivation, possibly associated with a long-term decrease of activities. The restricted competition of ideas can lead to a long-term decline in competitiveness, since the reduced competencies of the decentralized employees can inhibit their individual performance development. Centralization leads to a greater burden on central decisionmakers because the quantity and complexity of decisions increase. Individuals affected by centralization (in a different location) may experience family relocation problems and additional financial problems. The Corona pandemic and the current China discussion have brought additional arguments into the discussion with contagion risks for (too) many and (too) strong dependencies/blackmail possibilities on centralized procurement. And Ukraine's energy supply, which is based on relatively few large nuclear power plants, illustrates the possible increased susceptibility of certain centralized structures to crises.
Topic:
Sports, Economic Policy, Olympics, and Centralization
Political Geography:
Europe, Germany, and Global Focus

5. US-EU climate change industrial policy: Pulling in different directions for cooperation, competition, and compromise

Author:
Cordelia Buchanan Ponczek
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
The United States and the European Union agree on prioritizing policies to address climate change, which includes securing supply chains for components essential to low-carbon technology. Despite this agreement, their policies to address climate change and low-carbon technology could foster competition. The US Inflation Reduction Act (IRA) reflects the competitive advantage of the US to draw in the best talents, capabilities, and resources from outside sources. This leads to a disconnect between the industrial policy benefits of the IRA within the US and the potential competitive impact the IRA has on US relationships with allies. The EU’s policies are shaped by the bloc’s desire to respond to external actors—including China and Russia—while protecting the common market and building up its internal capability to ensure security of supply. This is complicated by individual member-state objectives. The 2024 US presidential election could bring change: A Republican administration might not share the EU’s outlook on climate change, the need for government intervention, or even the close transatlantic relationship seen during the Biden administration.
Topic:
Climate Change, Governance, European Union, Economic Policy, and Geoeconomics
Political Geography:
Europe, Finland, and United States of America

6. The role of space technologies in power politics: Mitigating strategic dependencies through space resilience

Author:
Markus Holmgren
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
Space activity is experiencing a boom with the scope and importance of space technologies and services fuelling rapid growth upon growth. While the space boom is catalysing transferral of the ownership of previously public infrastructure and capabilities to corporate control, many space technologies have critically important military and civilian applications. As the importance of space sectors grows, both public and private cyberoperations targeting space infrastructure proliferate. This makes it more difficult to attribute the perpetrators of cyber operations. The United States’ lead in the space sector is increasing. Starlink, a satellite internet constellation operated by the US-based company SpaceX, will serve to bind many nations to one more US-controlled communication architecture. As a result of the implications of space technologies for comprehensive security, building space resilience is becoming paramount. States must diversify their supply of space-related services and tighten cooperation with like-minded states.
Topic:
Security, Foreign Policy, Defense Policy, Economic Policy, and Geoeconomics
Political Geography:
Europe and Finland

7. Mexico’s domestic decay: Implications for the United States and Europe

Author:
Lauri Tahtinen
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
President Andrés Manuel López Obrador (AMLO) has challenged Mexico’s democratic institutions, including the electoral commission INE, and relies on the military to run sectors of the economy and to provide internal security. Recognizing the continuing strategic importance of its southern neighbor, the United States is attempting to “friend-shore” American industry to Mexico despite trade disputes. Mexico’s economic convergence with the US is giving way to ideological divergence. In the past year, Mexico has called NATO’s stance on Ukraine “immoral” and openly aligned with the leftist, anti-US dictators of Cuba, Nicaragua, and Venezuela. Mexico’s internal development and shifting external stance could spark a return to a United States focused on the protection of its 19th-century borders instead of its 20th-century global footprint. European attention to the future of Mexico can help diversify the country’s trade and other partnerships, as well as shine a light on its democratic decay.
Topic:
Security, Defense Policy, Democracy, Europe, and Economic Policy
Political Geography:
Europe, Latin America, North America, Mexico, and United States of America

8. Ukraine’s political model recast: Assessing new opportunities and risks

Author:
Arkady Moshes and Ryhor Nizhnikau
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
The Ukrainian political model is in flux. The war against Russia has eroded the core elements of the old order, in which elections were a focal point of the political contestation and the main mechanism for resolving political conflicts. Oligarchs have lost their critical role in Ukrainian politics. Their impact on the media and the party system has weakened considerably, which is a very positive development for the country’s democratic progress. At the same time, the disappearance of the oligarchs as a quasi-institution facilitates the process of power concentration around President Volodymyr Zelenskyy and his Office. Given the absence of elections due to martial law, this poses the risk that the new political model might be tailored to the incumbent’s needs to the detriment of the public interest. As the war becomes protracted, societal pressure to reactivate comprehensive reforms in the country, including the fight against corruption, is increasing. This creates certain tensions between the national leaders and the general public. Ostensibly, the incumbent president cannot and will not be able to ignore this demand, especially if it is firmly and consistently supported by Western actors.
Topic:
Democracy, Oligarchy, Domestic Politics, Economic Policy, and Russia-Ukraine War
Political Geography:
Russia, Europe, and Ukraine

9. EU-China relations in an uncertain world: Walking a geopolitical tightrope

Author:
Sinikukka Saari, Niklas Helwig, Juha Jokela, and Mikael Mattlin
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
After the 2008 financial crisis, the EU’s approach towards China shifted from overconfidence in European normative power to an embrace of unconditional economic engagement with China. The EU policy of de-risking is critically important, but it needs to be carefully considered, managed, and communicated to China. US-China tensions and American debates on China impact the EU’s approach. Nevertheless, there are significant differences between European and US positions on China irrespective of which party holds power in the US. China’s position on Russia’s war of aggression is a make-or-break issue for the EU. By actively enabling Russia’s invasion, China is harming its own long-term interests in Europe and globally. It is in Europe’s interests to avoid framing current international dynamics in terms of “the West and the rest”. Although this discourse may be popular domestically, there is a danger of it becoming a self-fulfilling prophecy.
Topic:
International Relations, European Union, Geopolitics, and Economic Policy
Political Geography:
China, Europe, Asia, and United States of America

10. A shared EU-US economic agenda for the world: Engagement as an imperative

Author:
Lauri Tähtinen
Publication Date:
12-2023
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
It is time for the European Union and the United States to build a shared, positive economic agenda towards third countries. Such an agenda would build upon the bilateral relationship but not focus on it. It would still be shared, even if the parties may have distinct reasons for supporting different aspects of it. The first elements of a shared economic agenda are evident in the EU-US Trade and Technology Council projects for Jamaica and Kenya. However, the political window for further alignment between the US and the EU, as well as for European trade deals, may be closing in 2024. Future initiatives should take into account major economies such as Brazil, Mexico, and Indonesia. The entry into force of the EU-Mercosur agreement should be a high-level priority for both Washington and Brussels. The current state of the EU-US relationship is characterized by a divergence in technology, industrial policy, and environmental policy. To move onto a path of convergence, Washington must reassess its exaggerated fears regarding the regulatory power of the EU, and use the spread of European standards as a means towards shared ends.
Topic:
Environment, Industrial Policy, Science and Technology, Bilateral Relations, European Union, and Economic Policy
Political Geography:
Europe, Latin America, and United States of America