On October 19th, the Financial Times website published an article titled "Countries Seeking Economic Security in a Turbulent World" by columnist Alan Betty. The content is compiled as follows:
There are some psychological issues that people have been asking themselves for a long time: How safe do I feel? How can I be safer? Nowadays, every trade dependent economy around the world is exploring the answers to these questions internally.
Three years after the supply chain was "frozen" due to the impact of the COVID-19, with the intensification of geo economic competition, "economic security" has become a buzzword in the government departments of Japan and EU countries with strong trade strength.
This highly flexible concept (which actually rephrases a long-standing problem) still needs to be carefully considered. Economic security may still be limited to controlling sensitive technologies, such as high-end semiconductor production equipment. Economic security can also be extended to include resources crucial to the value network, such as rare earths. Alternatively, as some European officials who are more supportive of state intervention in the economy hope, economic security can extend to establishing a broad industrial base, including products with relatively little impact on national security, such as electric vehicles.
Designing and implementing relevant policies can cause many problems. European trade officials are preparing for their territories to be invaded by swarms of security bureaucrats, who lack the awareness of balancing promoting growth and reducing vulnerability. A broad definition will also make everyone pay a high price, either in the form of public investment and subsidies, or in the form of European consumers paying more for taxed or restricted imported products.
Taking electric vehicles as an example (from a broad economic and security perspective, this field will definitely be examined), the rewards of promoting growth are likely to be greater, more sustainable, and more beneficial to the planet than those of resisting competition or collaborating with allies.
But what the EU is pursuing, of course, is to resist competition and cooperate with allies. The European Union recently announced an investigation into China's subsidies for exporting electric vehicles to Europe. After US President Biden's Inflation Reduction Act introduced tax credit measures for American electric vehicle manufacturers, the European Union spent a lot of diplomatic effort to obtain tax credit eligibility for companies in EU countries.
But both approaches are one-sided and defensive. EU officials acknowledge that if a countervailing duty is approved, there will be no other use than slowing down the speed of importing Chinese cars. The tax rate may be around 10%. Even with the existing 10% tariff, it is likely that it will not be able to offset China's full cost advantage. Imposing very high tariffs on China may make electric vehicles very expensive, making European consumers unwilling to purchase them, which could undermine the EU's "green" reputation.
As for cooperation, the European automotive industry must find better allies, rather than desperately competing for the financial "residue" thrown out by the US government. Regardless of whether Trump is re elected as president or not, the White House itself is not a reliable ally in economic security. The Biden administration currently threatens the European Union that unless Brussels weakens its carbon emissions system and formulates a plan to prevent steel imports from China, the White House will restore Trump era tariffs.
The best strategy of the EU is to promote growth and develop a single market. It is the establishment of an ultra efficient supply network, especially in Central and Eastern Europe, that has protected the German automotive industry from the impact of low-cost competition.
The capital, energy, and banking markets in the EU are still fragmented and inefficient, which has widened other cracks. The EU economy is still vulnerable to differences among member states: look at the trade restrictions on masks imposed within the EU in the first few months after the COVID-19 outbreak.
Compared to establishing a high-level technical working group with new intervention measures, scrutinizing the details of financial institution regulations and coordinating cargo inspection procedures is far less attractive. But the latter is the correct approach.
There is still a long way to go in defining economic security, let alone formulating policies and determining implementation measures. But one guiding principle is clear. To improve the adaptability of the economy, the primary focus is on high productivity growth and the application of technology. The EU cannot achieve economic security solely through regulation. EU enterprises must first have competitiveness.