China was front and center at the 50th G7 summit taking place in Italy. On the threat China poses to collective economic security, in particular, Europeans and Americans broadly share a diagnosis of risks. But beyond the diagnosis, they do not yet agree on a shared policy remedy.
First the good news. A collective diagnosis to confront the economic and national security threats from China has been building for some years but has perhaps never been as vivid as in the leaders’ statement in Apullia. From its industrial support to Russia and its trade over-capacities to its show of strength in the South China Sea, its crackdown on Hong Kong, and its lending practices to developing countries — G7 leaders were more outspoken than ever.
Europeans have undergone a significant transformation in making sense of economic security threats. The scale, speed and style of China’s techno-industrial advancement are leaving even the most ardent European free traders to realize that prosperity and security are complex privileges and that certain economic and technological transactions require a more managed approach.
With the economic security strategy of 2023, Europeans have provided themselves with a framework for action: promote, protect, partner is the mantra. Though the U.S. does not yet have a formal economic security strategy, speeches by national security advisor Jake Sullivan and other senior officials and policy actions indicate a close connection in approaches.
Europeans and Americans are, therefore, not so different in the economic security realm. But despite the shared diagnosis, three hurdles to closer cooperation remain.
Europeans draw a line between national security and economic security.
The transatlantic partners have big differences on one fundamental question: What is a matter of national security, and what isn’t?
Europeans are keen to distinguish between economic threats (like China’s strategy to dominate key industries through unfair trade practices) and national security ones (such as sensitive technology falling into military hands). They contend that national security should remain a narrow and precise affair. Washington, meanwhile, has adopted a more expansive view of national security that tends to bite off much larger chunks of economic and technological transactions.
This difference matters because America’s more blunt national security approach puts Europe in a difficult spot for one of its core interests, which is to maintain the semblance of an international trade order that allows for national security measures as narrow exemptions which don’t swallow all rules.
Getting down to the basics of what defines common security objectives will, therefore, be crucial for the transatlantic alliance. Americans should provide a more detailed motive of which transactions are at the core of their national security thinking and which transactions lay outside that core. Europeans, meanwhile, should broaden their national security focus beyond traditional military threats, for example by bringing in more foreign and security expertise into their economic decision-making.
Europeans want to build on strengths, not only restrictions
The transatlantic partners have roughly adopted the same risk remedy package: promote, protect, partner. However, Europeans are concerned that Washington is over-emphasizing the protective element of this mantra, such as controlling the export of semiconductors (and the things to make them), outflowing investments or data transfers.
Efforts to build a more powerful transatlantic market — running faster together, in Jake Sullivan’s language — appear to have less political weight.
This is a problem because a European Union, which is skeptical about Washington’s willingness to develop a shared and mutually beneficial design for an allied techno-industrial base, is less likely to support America’s more forward-leaning restrictive agenda. The Inflation Reduction Act, for example, has resulted in an erosion of trust among Europeans that American designs for re-wiring the cleantech space do not take allied interests into account.
In the future, building common strengths could go further, even absent a major trade agreement, for example by granting each other better mutual access to public procurement opportunities.
For Europeans, economic security is not only about China
China is on everyone’s mind, as evidenced at the G7 summit. But America’s intention of building a China-centric economic security front still remains a difficult pill to swallow for many Europeans. They intend to cast a wider economic security net, one which can tackle and unite security, resilience and sustainability concerns and speak to a broader audience of middle powers (whose views on China are anything but uniform).
To this end, the EU is trying to define new standards, such as setting limits for sourcing from single countries, rather than directly targeting Chinese suppliers. Both the EU Critical Raw Materials Act and the Net Zero Industry Act, for example, have innovated with resilience standards that could help diversify supply chains without explicitly targeting China. These standards are far from perfect, and it is too early to judge their impact. But they form an essential baseline for how the EU intends to advance economic security.
The transatlantic allies now have a chance to advance a shared strategy for managing economic and national security concerns in the global economy in the discussion on “principles on resilient and reliable supply chains” taking shape in the G7 (which include transparency, diversification, security, sustainability, trustworthiness and reliability). Filling these standards with life will be vital to move the transatlantic economic security agenda to the next level — beyond the shared diagnosis and towards a shared remedy.
Tobias Gehrke is senior policy fellow of geoeconomics at the European Council on Foreign Relations.