This external publication is part of the German-American Trade and Tech Dialogue (GATT-D) of the Aspen Institute Germany. Please find the key takeaways and recommendations below. The entire text, including citations, can be found in the PDF.
Key Takeaways
The European Union (EU) is facing a shifting geopolitical landscape, requiring a new economic foreign policy. A growing number of global conflicts, trade disruptions, cyber threats, and economic dependencies challenge the EU’s resilience. This study explores the evolving risk landscape, the EU’s trade policy transformation, and strategic responses. It advocates strengthening EU competitiveness, the careful application of trade defense tools, and global partnerships to secure Europe’s economic and geopolitical standing in a volatile world.
A Changing Global Landscape
The EU is navigating a rapidly evolving geopolitical and economic environment. Trade disruptions, cyber threats, supply chain vulnerabilities, and an increasing number of global conflicts pose significant challenges to its economic security and prosperity. The reliance on critical materials from a few suppliers heightens vulnerabilities. These factors necessitate a recalibration of the EU’s foreign economic policy to ensure resilience, competitiveness, and prosperity. Addressing these challenges requires a proactive approach to trade policy and strategic economic planning.
Importance of Open and Stable Markets
Trade is central to the EU’s economic growth and prosperity. With its member states collectively forming one of the world’s largest trading blocs, the EU relies on exports and imports to sustain industrial output, create jobs and competitiveness, and maintain high living standards. Open trade policies enable European businesses to access global markets, secure investment, and benefit from economies of scale. Moreover, trade fosters innovation by facilitating the exchange of knowledge, technology, and expertise across borders.
Dependencies and Vulnerabilities
The EU is highly vulnerable to geo-economic and geopolitical shocks due to its deep integration into global markets as well as reliance on external suppliers and export markets. As a block of interconnected economies, the EU depends on stable trade relations for access to critical raw materials and goods, energy supplies, and advanced technologies. Supply chain disruptions, trade conflicts, and economic crises in key partner countries can quickly impact production, employment, and overall economic stability within the EU.
The EU’s Evolving Trade Strategy
In response to these challenges, the EU is redefining its trade strategy to enhance resilience and reduce dependencies. Key elements of this evolving strategy include:
- Strengthening trade defense instruments to protect European industries from unfair competition and market distortions.
- Promoting sustainable and fair trade agreements that align with EU values and economic interests.
- Fostering strategic autonomy in key sectors by securing access to critical raw materials, products, and technologies.
While these measures signal a shift toward a more robust economic policy, significant deficits remain. The EU still faces slow decision-making processes due to the complexity of its institutional framework, often making it less agile compared to major global players like the United States and China. Additionally, while trade agreements have been concluded, implementation gaps and prolonged negotiations often weaken their effectiveness.
To bridge these gaps, the EU must accelerate decision-making, bolster trade enforcement, and invest in long-term strategies for reducing external dependencies. Without these improvements, the EU’s economic resilience and global competitiveness will remain vulnerable to geopolitical and market shifts.
Recommendations
Accelerate Decision-Making and Ensuring EU Unity – Streamlining bureaucratic processes and improving coordination among EU institutions and member states will enable faster and more effective responses to geoeconomic shocks and trade challenges.
Strengthen Trade Defense Mechanisms – Carefully enhancing the EU’s ability to counter unfair trade practices, including stricter enforcement of anti-dumping measures and subsidies regulations, will better protect European industries.
Diversify Supply Chains – Reducing reliance on a few external suppliers, especially for critical raw materials, semiconductors, and energy, will improve economic resilience and mitigate risks from geopolitical disruptions. The EU has to invest in domestic production capabilities for key technologies, strengthen research and innovation, and promote industrial policies that reduce dependencies on third countries.
Expand and Deepen Global Trade Partnerships – Strengthening alliances with like-minded countries, securing new trade agreements, and reinforcing multilateral trade cooperation will help maintain the EU’s economic influence and market access.
Reform of the Multilateral Trading System – Modernizing the World Trade Organization (WTO), advocating for clearer trade rules, stronger dispute resolution mechanisms, and fairer global trade practices, will ensure that the rules-based trading system remains effective. The EU needs to play a leading role in this regard.
