Questions of geopolitics played the central role at last week’s special European Council meeting in Brussels. But for all the talk of “strategic autonomy,” the debate in the European Council highlighted that the key to a new European positioning on the world stage lies in domestic EU politics. This will present member states with difficult political choices in the coming years.
The discourse on “strategic autonomy” already existed before the pandemic. But it has gained momentum due to concerns over Chinese cooperation in the early stages of the pandemic and the realization that access to key medical products can be a vital question in crisis times. Therefore, it is no surprise that last week’s Council conclusions call upon the Commission to identify strategic dependencies with a focus on the health industry.
The practical implications are, however, less clear. The Commission has been tasked with outlining potential solutions, including measures for supply chain diversification. Apart from the health sector, there seems to be broad agreement on focusing on specific raw materials and areas that are crucial for (green) energy and mobility. But substantial differences in the area of industrial policy have so far merely been papered over with rhetorical fixes such as talk of “open strategic autonomy.” This, however, cannot overcome structural variations in the organization of national political economies across the EU.
Therefore, the decisive variable for the “strategic autonomy” debate will neither be found in public talks by EU officials nor in position papers on Europe’s evolving relationship with China. Instead, what matters is the question of the way forward in the fields of industrial and competition policies. The EU has traditionally been weak on the former and strong on the latter – the result of three decades of European build-out mainly via enhanced market integration. Led by French President Emmanuel Macron, several – mostly southern – countries want to shift that balance. The recently agreed recovery fund is a key tool in their considerations.
On the other hand, however, stand the small, open, and competitive-oriented economies of Northern Europe. From their perspective, the recovery fund is a means to keep their most important market, the EU, intact; however, they are less likely to consider the fund a tool for improving (green) productivity in a state-directed manner. Germany has traditionally led this group, even if Berlin has recently become warier of Chinese takeovers and more open to cooperation with France on industrial policy. But on balance, this group still believes that competition within the EU single market is the best way to create “European champions” – i.e., by market forces, pushing individual member states to improve their competitiveness.
Export dependence and the state’s size in the different national economic models will thus be crucial factors in the debate of the coming years. This is why the question of EU (digital) taxation will also play a role in this context. The Council has vowed to get back to the issue of industrial policy at its March 2021 meeting. But probably the biggest moving part next year will be German domestic politics with the Bundestag elections. The state’s role in creating a new growth model for an age of global trade conflicts and climate change could be key dividing line in post-Merkel politics.