Open strategic autonomy and the new geoeconomics: consequences for EU trade policy

The European Union (EU) is adapting to the global power competition in the economic policy arena by shoring up its own “geoeconomic” competitiveness across a range of policy areas, ranging from new trade defence and anti-coercion instruments to mechanisms for screening security threats and state-sponsored investment subsidies in foreign investments and acquisitions.Europe’s open-ended autonomy agenda has exposed divisions among the Member States on how to manage the risks of geoeconomic interdependence while not undermining the trust in the multilateral rules-based trading system on which the EU has thus far thrived. More recently, Europe has gone beyond purely defensive measures, looking over its own capabilities of projecting geoeconomic influence abroad, with powerful sanctions and export controls, at one end of the spectrum, and with commerce-linked tools, such as supply chain controls and a carbon border adjustment, at the other.Europe must prepare for an age of reshoring and nearshoring, which promises to challenge as well as recalibrate Europe’s internal political economy concerning the economic power balance between north and south, debtor and creditor, net exporter, and net importer. The policy response: With the EU’s shares of global economic output and global technological innovation falling, there is a concern that its influence in the world is on the same trajectory. In its new trade strategy, Europe is turning to diplomacy and cooperation.The EU-US Trade and Technology Council serves to foster a common approach to digital transformation based on “shared democratic values”, while the new “Global Gateway” connectivity strategy based on EU social and environmental values rivals China’s Belt and Road Initiative. It is now looking at its network of bilateral trade and investment agreements, the most extensive in the world, to achieve cooperation with “likeminded nations”. The Commission is also developing a new EU industrial policy that will support geoeconomic resilience in the private sector