17 juli, 2023
The coming decoupling from China: Consequences for the EU’s economic security strategy
- The global exchange of capital, goods and services remains at historically high levels. However, a growing number of security-motivated barriers to trade and investment have begun to chip away at the hard-won openness of international markets. There are already signs that fewer investments are flowing between geopolitical rivals, and the fractures in the US-China trading relationship have widened since 2018.
- For many advanced economies, a decoupling from China appears imminent in key sectors. In the European Union, this gradual separation is driven by a swathe of initiatives pursued under Brussels’ “de-risking” policy, such as investment screening, export controls and industrial policies designed to bolster domestic production. If fully implemented, these instruments will detach the Chinese economy from specific areas of the Single Market that the EU deems sensitive, notably critical infrastructure, cutting-edge semiconductors, specific raw materials and equipment needed for the green transition.
- The security-motivated barriers between rivals are yet to be balanced by a corresponding opening up among allies. Although democracies are exploring ways to cooperate, their strategies increasingly favour domestic firms, while new trade barriers risk complicating exchanges with partners and non-aligned countries. Barring a renewed commitment to free trade by large, advanced economies, the net effect of the economic security dynamic is likely to be a significantly less open global economy.
- In the economic security space, the EU should consider abandoning its country-agnostic approach in the name of free trade. Concentrating on China would allow Brussels to limit the scope of many initiatives, reduce their cost and administrative burden, and minimize the risk of protectionism. This would signal to third parties that their exchanges with Europe are not at risk of being caught up in the EU’s economic security machinery.
- The leadership of the United States in the economic security sphere is being undermined by Washington’s protectionist tendencies and what many states view as an excessively restrictive policy on China. In this context, the EU can represent a distinct approach where any barriers towards China come with a promise of a corresponding opening up to partners and non-aligned countries.