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21. A Forward-Thinking Approach to Open Strategic Autonomy: Navigating EU Trade Dependencies and Risk Mitigation

Author:
Matthias Bauer, Oscar du Roy, and Vanika Sharma
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
For the EU, fostering economic interdependence is a more proactive and forward-thinking approach than resorting to defensive measures like eliminating alleged economic dependencies through restrictive regulations, as such actions would negatively impact Member States’ economies. The European Commission and some Member State governments keep pushing for “EU Open Strategic Autonomy”. Several EU laws have already been infused with the concept, resulting in a broad spectrum of EU interferences in production, trade, and investment in the Member States. With the “Resilient EU2030 Report on Open Strategic Autonomy”, the Spanish Presidency of the Council of the EU in September 2023 presented a new roadmap for how to further reduce external dependencies and strengthen EU technological leadership.[1] Similarly, implementing the EU’s Economic Security Strategy initiative, the European Commission presented a list of 10 critical technology sectors aiming to reduce potential economic dependencies and the risk of economic coercion.[2] This paper shows that EU claims about trade dependencies are not supported by trade data. Except for only few products, such as minerals and energy commodities, there are no critical dependencies on products and services imported from outside the EU. Regarding technology leadership, financial transfers for intellectual property rights indicate that EU businesses and public sectors institutions are benefiting much from advanced foreign technologies and innovation. Many if not most of these technologies are crucial for the EU’s international competitiveness, and they cannot easily be replaced by native EU production. At the same time, the EU is a significant exporter of technologies, including ICT and digitally enabled services that are not easily replaceable by non-EU countries. Policymakers should acknowledge the presence of these mutually beneficial interdependencies, as they can act as a hedge against risks like policy-induced disruptions in value chains and economic coercion. EU policymaking needs to recognise that trade and investment interdependencies, which include advanced technologies, are unavoidable. Trade interdependencies are critically important for maintaining competitive economies and high living standards in the EU. To mitigate potential risks, the EU should promote trade and investment relationships with trustworthy and like-minded partners, such as the US and OECD countries. EU policymakers should leverage trade interdependencies by increasing the competitiveness of EU exports, which act as a safeguard against dependency and the risk of economic coercion. Rather than limiting imports, the EU and Member State governments should initiate supply-oriented structural reforms to enhance the capacity and efficiency of production factors within the EU, which would ultimately bolster Europe’s export performance.
Topic:
International Trade and Finance, Treaties and Agreements, European Union, and Strategic Autonomy
Political Geography:
Europe

22. The Imperative of International Cooperation for EU Competitiveness and Resilience in Technology-Driven Industries

Author:
Matthias Bauer, Renata Zilli, and Dyuti Pandya
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The EU must embrace international cooperation and collaboration in technology-driven industries to ensure competitiveness and global relevance, while also considering the drawbacks of isolationist policies. The EU’s commitment to open markets and global cooperation has historically been its strength, and EU policymakers should continue to prioritise on these principles. Global markets, international R&D collaboration and global industry-led standards are crucial for innovation and efficiency in technology-intensive industries. Various sectors, including pharmaceuticals, ICT, aerospace, and defence, heavily rely on global partnerships to stay competitive and advance technologically. International cooperation in economic and security affairs, as exemplified by EU participation in global value chains of advanced semiconductors, the traditional EU approach to industry-led technology standardisation, and EU involvement in the international F-35 fighter development program, is critical for leveraging industry expertise, sharing technological advancements, and collectively addressing challenges in strategic sectors, thereby enhancing Europe’s economic resilience and security capabilities. Trust and legal certainty form the foundation for international partnerships in high-tech and defence sectors. Collaborations among like-minded partners enable secure information sharing, intellectual property protection, financial commitments, and compliance with regulations, while ensuring adherence to key EU values like human rights and the rule of law.
Topic:
International Cooperation, Science and Technology, European Union, Trade, Resilience, and Competition
Political Geography:
Europe

23. The Impacts of EU Strategy Autonomy Policies – A Primer for Member States

Author:
Matthias Bauer
Publication Date:
11-2022
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
EU governments should be much more sceptical and critical of the EU’s strategic autonomy agenda and the new polices intended to achieve the EU’s “long-term” industrial and technological ambitions. The long-term costs for Member States’ economies and the process of economic convergence are largely ignored by the agenda. Negative impacts of strategic autonomy on trade openness and the international rules-based trading system are also greatly understated. Many EU strategic autonomy ambitions are inherently guided by a “European Union First” impulse. Policymakers follow the assumption that EU values are superior to those in other parts of the world and EU regulation should be different from third countries. Major strategic autonomy aspirations represent a relapse of the EU to the old policy of EU member states designing and enforcing their own laws without considering the economic and political costs of regulatory fragmentation and economic disintegration from others. Recent strategic autonomy policies are estimated to create income losses in the EU of between 0.08% and 0.15% of EU27 GDP. These losses correspond to short-term economic harm resulting from changes in the use of productive resources in the EU. Long-run impacts, which reflect losses to productivity and innovation, could be up to 3 to 5 times higher with national income per capita falling by up to 0.5% to 0.75%. The costs are not evenly distributed across the EU27. Larger countries like France and Germany are less impacted than smaller ones, notably Ireland and the Baltic states. The impacts on Ireland, for example, are close to 4 times bigger than they are for France, the impacts on Estonia close to twice those on Germany. Strategic autonomy ambitions have failed to account for negative impacts on developing countries. To the extent that the EU’s policy stance further fragilizes rules-based multilateralism, there are longer-term impacts stemming from a less certain legal environment and higher barriers for cross-border trade and investment. EU strategic autonomy policies have the effect of empowering vested interests in developing countries to engage in lobbying for their own protectionist policies. Accordingly, EU strategic autonomy policies risk encouraging the diffusion of protectionist policies globally, particularly in countries with weak institutional capacity. EU Member States should examine their options and ask themselves whether there are better long-term strategies to pursue than those currently proposed at the EU level, strategies guided by the spirit of an open society – a society embracing the principles of free trade, non-discrimination, and economic freedom. Europe’s policymakers should aim for closer market integration and regulatory cooperation with trustworthy international partners such as the G7 and the larger group of the OECD countries. It is in the EU’s self-interest to advocate for a rules-based international order with open markets. It is neither in the EU’s economic nor its political interest to disintegrate from partner countries.
Topic:
Markets, Treaties and Agreements, European Union, Trade, and Strategic Autonomy
Political Geography:
Europe

24. Strategic Autonomy and Long-term Innovation Competitiveness: On the Importance of Intellectual Property Rights for the Production of High-Value Medicines in the EU

Author:
Matthias Bauer
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Europe’s political leaders have in recent months called for “European industrial autonomy”. Notions of dependency, sovereignty and resilience are now also referred to in policy proposals targeted at pharmaceutical companies, with “strategic autonomy” being the ultimate political ambition. The precise meaning of strategic autonomy in biopharmaceutical industries remains yet to be defined, although the current Pharmaceutical Strategy only refers to “open strategic autonomy” in the context of dependencies and supply chains. This is regrettable, as it does not take into account the importance of strategic research and innovation autonomy, allowing the EU to ensure a high degree of autonomy in innovative medicines and therapies. Current policy conceptions fail to account for businesses’ long-term international innovation competitiveness and Europe’s capability to attract investments in pharmaceutical research and cutting-edge production technologies. Present conceptions of strategic autonomy of Europe’s pharmaceutical industry disregard the fact that the EU is substantially lagging the USA and, increasingly, other parts of the word in pharmaceutical innovation. Clinical trials’ pipeline data shows that, in the future, EU Member States will very likely become increasingly dependent on innovative medicines that are temporarily protected by patents and market exclusivity rights held by non-EU rights holders in many therapeutic areas. This gives some urgency to Commission President von der Leyen ensuring that the European industry remains an “innovator” and “world leader” (Mission Letter by Commission President von der Leyen to Commissioner Kyriakides). The European Commission’s current understanding of sovereignty in pharmaceutical industries centres around one core theme: the reduction of dependencies from pharmaceutical suppliers outside the EU. At the same time, in an effort to achieve equitable access to affordable medicines and to foster research into unmet medical needs, it considers changes in the incentive structure for research in medicines for children and rare diseases, and new obligations for companies to achieve a more equitable access to medicines across Member States. While these objectives are generally merited, the Commission has established a narrow perspective about a concept that is aiming for ambitious long-term achievements for Europe’s pharmaceutical industry. The industry’s future innovation competitiveness and the capacity to develop and produce high value-added medicines, which should be at the core of any concept of long-term autonomy, have largely been ignored.
Topic:
Intellectual Property/Copyright, European Union, Innovation, Medicine, Strategic Autonomy, and Economic Competition
Political Geography:
Europe

25. The EU Digital Markets Act: Assessing the Quality of Regulation

Author:
Matthias Bauer, Fredrik Erixon, Oscar Guinea, Erik van der Marel, and Vanika Sharma
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The proposed Digital Markets Act (DMA) is an opportunity to prevent and remedy anti-competitive conduct by large digital platforms. If the Act is designed in an adequate manner to target specific problems, it can improve the contestability of platform services markets and markets that rely substantially on digital services. However, the DMA takes a novel approach to regulation, and novelty in concepts and regulatory requirements can lead to outcomes that later have to be corrected. Fortunately, the EU is not alone in experimenting with new regulations that specifically target the market power of large digital platforms. There is a great scope for policymakers to learn from similar frameworks in Europe and the United States. In this study, we compare key parts of the DMA proposal with similar legislation implemented or proposed in Germany, the United Kingdom and the United States –– in light of established principles for good regulatory design. We analyse the structure and quality of these regulations, not if they go in a certain ideological, political or commercial direction. We find that there are some areas where the EU could learn from other proposals to make the DMA more fit for purpose, and avoid unintended consequences on Europe’s economy.
Topic:
European Union, Regulation, Digital Economy, and Digital Markets Act (DMA)
Political Geography:
Europe