Speech by EVP Margrethe Vestager at the event organised by Bruegel on "Europe's economic security: vulnerabilities and solutions"

Security through strength and resilience

Good afternoon,

Thank you very much for the invitation to speak today. Congratulations to Bruegel and all the authors for the publication of the Paris Report on economic security. This report contributes to an important conversation Europe is having right now, and I am delighted to take part in the discussion with you. It is a conversation about how we position ourselves in the fact of a new geoeconomic landscape and new market realities.

The first thing to say about the Report is the sheer breadth of material you cover, which is impressive. Which also means, of course, I do not have time to address all the points it raises. So instead I will try to share a few main reactions.

First of all, when you start a conversation, it is always useful to agree on the premise. And we do. It's True that in just fifteen years, Europe had to bear with a financial crisis from the US, a pandemic from China, and an energy shock from Russia. But it doesn't all come from outside. Our ability to face this situation could have been different if we had not been somewhat too complacent. Or too greedy. For years, we built our economic model on cheap labour, cheap energy supply. Enjoying the prosperity it created, we ignored the security risks it entailed.

But now, things have changed. Albert Einstein is right in saying that “adversity introduces a man to himself ”! In a way, the return of war to Europe has led to a new thinking, be it among politicians, in the public opinion and also in the business community. There is a realization that we cannot rely on exclusive suppliers, because this creates chokepoints. And that we need a paradigm-shift: from “efficiency-first” towards more consideration of resilience and security, and of Europe's ability to have a say in the world. This is how our Economic Security Strategy was born.

Second – and this is an important point that you also stress in your report – we cannot let economic security be used as an excuse for protectionism. Europe's export sector is by far the most valuable in the world - the EU's exports are worth more than those of the US and China combined. In simple terms, this means our economic security depends on our trade.

Putting our economic security strategy into practice, is a constant, careful balancing act. However tempting it may be, we will not make our economy safe by taking drastic, cut-and-dried measures. This is why our approach is one of de-risking through precise, proportionate measures.

When addressing risks to our supply chains, we focus only on those key sectors where we identify vulnerabilities, while preserving as much economic openness and dynamism as possible. By targeting our action, we avoid single points of failure, and prevent our dependencies from being weaponized against us.

You can see this in the design of the Net-Zero Industry Act. Clean tech has a vital role to play not only in delivering on our climate promises, but also in economic security – after all, if we are to run the economy on green industry, we need to ensure that the green economy's industrial base is secure and stable. That is why the new Act identifies a set of technologies that are eligible for support via targeted strategic projects – things like solar photovoltaic, wind, fuel cells and grid technologies.

But the challenge is that precisely in these strategic areas, we now face an unprecedented supply shock that originate from overcapacities in China. China is exporting excess capacity across the world at low prices, that we can hardly compete with. This is a shock that our market cannot absorb, and which carries strong risks for our industry. Faced with an unlevel playing field, Europe must be assertive. We must use the tools that we have. You will have seen our disclosure last week on planned tariffs on electric vehicles, as well as the investigations launched in areas such as wind turbines or solar panels, under the Foreign Subsidies Regulation.

Going forward, we will need to develop a more systematic approach to address distortions in critical supply chains. I am glad that just a few days ago, the G7 Summit agreed to launch coordination on qualitative criteria that take into account factors such as trustworthiness, security and sustainability. If like-minded partners can develop common objective criteria for our critical supply chains, we would be creating a premium market where all producers that meet such criteria can gain scale. Eventually, we reach critical mass, and align our competitiveness with the values that we share. In today's geopolitical world, this is no small thing.

Let me now turn to technology security and leakage – one of the four main risks identified in our economic security strategy. Europe wants to be a player, not a playground. And to be a player, we need a united European position, based on a common assessment of the risks. To that end, we've developed a list of critical technologies for economic security, and we are currently assessing risks, jointly with Member States, on advanced semiconductors, quantum computing, AI and biotechnologies.

Here our approach matches closely with the findings of the report. While the EU might not lead in various of these technologies, we remain at the frontier of technology. From the policy perspective we focus also on the societal added value of using these technologies. Europe's research and innovation is critical to its competitiveness. Our approach to research security therefore seeks to balance the openness and international cooperation that is in the DNA of every researcher, with protecting our technology from risky foreign interference, or control.

And to boost our technology leadership we need the benefits of scale that come from the single market, Europe's biggest asset. Here I could not agree more with the findings of the Paris Report. Deepening the single market would strongly contribute to de-risking our economic security.

It would allow to swiftly re-direct trade flows in the event of crises, and provide a strong lever to promote our competitiveness. We all know this is work in progress, and I will not go into detail today on what needs to be done. Prime Minister Letta left us a lot to reflect on, and take forward on that front.

We have talked about protect and promote. But the third principle of the economic security strategy is in no way less important: to partner with the broadest possible range of countries who share our concerns or interests on economic security.

I mentioned before that the EU had by far the largest export sector in the world. We also have one of the most diversified exporting profiles in the world – the EU is the top trading partner for 80 countries.

This trade diversity is a strength we must play to. We don't respond to economic risks by cutting the flow of entire supply chains. Instead, we increase the diversity of our suppliers. This starts by creating attractive value propositions to partners all around the world, who, just as us, are keen on having a diversified range of economic relationships, to be more resilient in the current geopolitical environment. Here Europe can be the partner of choice to many developing and emerging countries , provided we can keep a pragmatic, results-oriented approach to these relationships.

Of course the transatlantic relationship is a vital part of our economic security strategy. The Report reminds us of the benefits and risks of our trade integrations with the United States. I am very proud of the work that we have achieved over the last years within the EU-US Trade & Technology Council. This format has managed not only to produce tangible results, particularly on our technology cooperation, but has also been a stabilising factor whenever there have been risks of derailing the largest economic relationship in the world. This experience has left me convinced that, no matter the outcome of elections this year, both sides will continue to have an interest to cooperate on economic security. And to do so on the basis of a stable setting, like the TTC.

To conclude, I'd like to repeat what some of you may have heard me say already: “we don't solve conflicts, we manage paradoxes”. This sentence from Esther Perel comes from the world of psychology. But I think it applies particularly well to how we approach our own economic security. The best answer we can provide will never be clear cut. It is a management of paradoxes. A complex exercise of striking the right deal between our trading openness and the defence of our economic interests. Between what we give to, and what we gain from, others around us. In other words, as open as possible, as closed as necessary.

Thank you