The European Commission has proposed a new strategy that would boost its capacity to bring EU economic and industrial policies in line with the bloc's broader strategic and security goals, but the proposal will likely face pushback from member states reluctant to increase pressure on China and cede authority to Brussels. On June 20, the European Commission presented its first-ever economic security strategy, which, among other things, highlights the need to curb EU member states' exports of highly sensitive technology (like artificial intelligence, quantum computing and advanced semiconductors) and to scrutinize outbound investments that could enhance the military and intelligence capabilities of actors who may use them ''to threaten international peace and security.'' While not explicitly called out by name, China is heavily implied as the main target, as the draft strategy stresses the need to ''de-risk'' the bloc's economic relations — a concept European Commission President Ursula Von der Leyen has repeatedly used in recent months in reference to Brussels' ties with Beijing. The document also underscores the risk of becoming overly reliant on ''a single country, especially one with systemically divergent values, models and interests,'' which is another clear reference to China, given many EU members' close economic relations with the Asian giant and reliance on Chinese raw materials and green technologies for the energy transition. 

• Von der Leyen first introduced the idea of ''de-risking'' the European Union's economic relations ahead of her March 30 visit to Beijing. She then brought up the concept again in her discussions with fellow Western leaders at the last Group of 7 (G-7) meeting in May. 

The changing geopolitical landscape and the global race to access and control strategic economic resources are pushing the European Union to move away from its traditional free-market approach toward more defensive economic tools. The document reflects the bloc's ambition to pursue greater strategic autonomy — especially in the wake of the global supply chain disruptions caused by the COVID-19 pandemic and the energy and inflation crisis brought on by Russia's war in Ukraine. As the geopolitical landscape becomes increasingly volatile, the European Commission's proposed strategy aims to form a systemic, coherent and coordinated approach that leverages EU members' combined economic heft (the EU, as a whole, is the largest economy in the world) to better pursue the bloc's strategic goals and face emerging challenges. The European Union has already taken steps to reduce its own economic vulnerabilities and critical dependencies through its efforts to secure its 5G networks and curb its reliance on Russian energy exports, as well as through new inbound investment screening mechanisms, trade defense instruments, and various industrial policy proposals. With the tools outlined in its new European Economic Security Strategy, Brussels is now looking outward, seeking to control the outsourcing of key industries and technologies that could enable its adversaries (namely, China and Russia) to enhance their military and intelligence capabilities, as well as undercut the bloc's competitiveness in key strategic sectors.

• The draft seeks to tie recently approved EU regulations with those currently under discussion under a single comprehensive strategy aimed at strengthening the bloc's economic resilience. New instruments to control exports and outbound investments are thus presented as part of this broader effort to enhance EU competitiveness, diversify supply chains, and respond to economic coercion from countries like Russia and China.
• One of the main obstacles to the European Commission's strategy is the fact that individual member states ultimately retain the power to impose eventual controls over their exports, as evidenced by the Dutch government's recent move to block exports of advanced semiconductor manufacturing equipment to China amid U.S. pressure. On the one hand, the Dutch export ban showed the extent to which a choice made by a country's government can impact the trade and foreign policy of the entire bloc, as the restrictions could trigger a trade dispute with Beijing that impacts the European Union at large. But the ban also highlighted how the lack of an EU-wide strategy on export controls has left individual member states more vulnerable to being coerced by third countries (the United States, in this case) into making potentially detrimental unilateral decisions. 

If the commission's plan to control exports and outbound investment is approved, it would more closely align the European Union with the United States' approach toward China, while also accelerating a broader trend in which security considerations are becoming more central in the bloc's economic and industrial policies. The debate between EU institutions and member states to create a common economic security framework will last for months (or even longer). But the commission's strategy already implies a tougher stance on China by stressing the need for new rules to control exports and outbound investment. If the strategy is approved, the measures aimed at avoiding over-dependence on China and actively curtailing the advance of China's technological and military capabilities would bring Brussels' approach to Beijing in closer alignment with that of Washington's. But the European Commission's document still only proposes targeted measures on sectors where there are clear military implications — likely in an effort to avoid excessively alienating China, which remains the European Union's largest trading partner as well as a critical supplier of the materials and technologies the bloc needs to transition to clean energy. More broadly, while the strategy calls for signing free trade agreements with like-minded countries, the commission's plan (along with its other recent proposals) indicates a clear push to put economic security considerations at the center of EU economic and industrial policies. Against this backdrop, protectionism and interventionism are becoming more prominent across the bloc, with the state's role in probing investment and trade relations only set to increase.

• The latest G-7 summit underscored the group's focus on strengthening ''global economic resilience and economic security'' through enhanced coordination to, among other things, address economic coercion by third countries and prevent cutting-edge technologies from bolstering its adversaries' military capabilities.
• While China is the European Union's main concern, the commission's strategy would also equip the bloc with tools to respond to a potential deterioration of its relationship with the United States (should, for example, next year's EU elections and U.S. presidential election yield more protectionist policies on either or both sides of the pond).

If, on the other hand, the plan is rejected or significantly watered down, this would leave the European Union with fewer tools to protect itself in a context of growing global technological and geopolitical competition. Member states retain the power to assess security threats and approve their companies' exports and investment decisions, and they will be reluctant to cede such prerogatives to Brussels. Indeed, any transfer of competencies from member states to the commission could be seen as changing the very nature of the European Union as an organization (from a conglomerate of sovereign countries uniting to increase their economic and political leverage, to a somewhat centralized authority that can make decisions on their behalf). Because of this, even just granting the commission the ability to determine what constitutes a risk or a threat to the bloc's economic security could face resistance from member states. Moreover, member states (including Germany and France) embrace varying economic schools of thought (with some skewing more protectionist than others), as well as differing perceptions of the eventual risks associated with their bilateral relationships with China, which will complicate finding a consensus for both the development and the eventual implementation of export controls and outbound investment screening. Finally, EU elections in 2024, which will lead to the formation of a new European Parliament and European Commission, may disrupt the process of drafting policy proposals based on the guidelines outlined in the strategy. 
Due to all of these constraints, the European Commission's attempt to create a strong and cohesive EU geoeconomic approach risks backfiring by lacking strategic clarity and instead resulting in a fragmented set of policies that only further confuses the European Union's member states, companies, allies and even adversaries regarding the bloc's economic and industrial strategy. 

• Two recent precedents provide good examples of the challenges ahead for the Commission in redefining Brussels and member states' powers when it comes to combining trade and investment with foreign policy and security policies. In 2019, EU countries adopted a common investment screening mechanism (ISM), which provides a framework for the exchange of information between member states regarding inbound investment screening. However, the ISM leaves the ultimate decision on whether to veto a transaction to national governments, thus negating an EU-wide approach to the issue. This past March, the European Union also agreed to an anti-coercion instrument (ACI) to enable the bloc to respond to economic coercion from third countries. Brussels can trigger the process to assess economic coercion from a third country, engage diplomatically with said country to try and resolve the issue, and eventually propose countermeasures. However, it is ultimately up to the EU Council (and therefore to member states) to determine if such coercion actually exists and whether to do anything about it. 
• If the commission's strategy is approved, the new tools that would eventually follow could further enhance the commission's role in the area of economic security. But member states would likely retain the ability to ultimately take action — thus limiting the European Union's capacity to act as a single, coherent geoeconomic actor, while enabling third countries (like China and the United States) to continue exerting pressure on single member states.