The European Commission released a 2021 Strategic Foresight Report. This report is is an important signalling device on where Brussels intends to take the EU in the coming years with the blessing of its most powerful member states. And that path clearly heralds a trend towards more investment and trade restrictions, not least via its ramped-up industrial policy.
The Communication is entitled The EU’s capacity and freedom to act and spells out in more detail what the Commission intends to pursue on the EU’s path towards greater “strategic autonomy”, without announcing concrete new measures. The report dwells on climate resilience and security issues but trade and investment are strongly weaved into the discourse.
In the tech and digital sector the EU intends to make efforts in catching up in terms of capacities in the area of artificial intelligence, big data and robotics with the US and with China.
Supply chain vulnerabilities in crises are an underlying theme of the report, which takes lessons from the pandemic and climate crisis and concomitant geopolitical instability.
In the area of health the EU states clearly its aim of “establishing or re-establishing the production of some critical medicines and medical countermeasures in the EU”, which would be compensated by “innovation in manufacturing processes for possibly higher production costs”.
The EU is strongly focused on gaining strategic autonomy in the area of semiconductors. Again this is nothing new, but it is a point that is being reinforced in what is ultimately a short 23-page report.
“To stay in the race, the EU needs to invest in capabilities for the next generation of processors and semiconductor chips. This requires a tightened screening of foreign take-overs of the European production capacities (editor’s highlights), investments in research and development and setting favourable conditions across the value chain”.
The European Commission’s services dealing with industry are also being kept awake at night by the risks of shortages of “critical raw materials” – whose strategy was revised in the spring 2020.
“The defence industry relies heavily on critical raw materials, for example almost half of the materials needed in aircraft production com from non-EU countries. The increase in demand for critical raw materials is expected to coincide with an upturn in the major suppliers’ readiness to impose export restrictions,” says the report.
“A smart mix of industrial, research and trade policies with international partnerships could ensure sustainable and diverse supply,” the Commission adds. The EU recently signed two critical raw materials partnerships with FTA partners Canada and Ukraine.
The EU’s negotiations towards and FTA with Chile and Australia have a strong raw materials dimension to them.
“In most cases, industry is best placed to reduce strategic dependencies by diversifying supply, making greater use of secondary raw materials and substitution.”
The EU’s strategic autonomy approach to managing its trade is already being rolled out as part of a stepped-up industrial policy. Where the EU increases its industrial policy focus, it also tends to increase barriers and costs to imports in the sector.
The EU’s industrial policy is centred on the development of “industry alliances”. The first industry alliance was pioneered in 2017 with the Battery Alliance. That alliance model is being rolled out in the data/cloud sector, semiconductors and processors, energy-intensive industries, plastics and soon in the aerospace and defence sector.
So far industrial policy has mainly spilled over into the trade defence area. EU trade defence measures are relatively few in number and are not likely to increase significantly. However, these measures tend to be taken exactly in those sectors where the EU is pursuing active industrial policies, such as e-bikes (Battery alliance) or steel, as shown in the table below.
|Revised Industrial Policy: Ecosystem
|Commission-driven business 'Alliance'
|Date of Alliance launch
|Trade Defence measure in sector since 2020
|Other trade policy initative
|Aerospace & Defence
Alliance on Space Launchers
Alliance on Zero Emission Aviation
|Industrial data, edge and cloud
|2 new investigations into Optical Fibre products leading to imposition duties;
|Processors and semiconductor technologies;
|Clean Hydrogen Alliance
|9 new TDI investigations into steel & aluminium products; July 2021: extension of steel safeguard measure; 2021 to date: 4 new investigations into steel related products (inputs/raw materials)
|1 new investigation into steel wind turbines
|Mobility (transport & automotive)
|July 2018 Anti-dumping duties on E-bikes from China
|Circular plastics alliance
|. October 2020: Monoethylene Glucol TDI investigation launched, provisional tariffs in June 2021.
. Feb 2021 launch of investigation into superabsorbent polymers
|Horizontal industrial policy
|Critical Raw Materials Alliance
|Critical Raw Material parterships: Canada (June 2021), Ukraine (July 2021)