Geopolitical and Economic Statecraft of the EU

How can the European Union Navigate the New Geopolitical Realities

The new landscape of globalisation’s geoeconomic forces and rising geopolitics have pushed the EU away from a narrow neoliberal, market-first stance toward an emergent “economic statecraft” and more towards the doctrine of “open strategic autonomy.” Driven by shocks (2007–08 crisis, COVID‑19, Russia’s 2022 invasion of Ukraine), technological and climate transitions, and U.S.–China competition, the EU has begun using economic tools (industrial policy, export controls, investment screening, CBAM, chips and net‑zero acts, Foreign Subsidies Regulation, Anti-coercion Instrument, etc.) to protect strategic interests, shore supply‑chain resilience and shape global rules. The shift is uneven, contested and experimental: instruments mix defensive commercial aims with political‑strategic goals, create internal tensions among member states, raise multilateral‑compatibility questions (WTO compliance) and risk unintended global consequences. To succeed, the EU must clarify long‑term political objectives, reconcile internal/external trade‑offs, fund and coordinate policies, engage partners (esp. the U.S. and Global South), and push careful reforms to multilateral rules rather than defaulting to unilateral or protectionist responses.

Key points

• Drivers: Crises (financial, pandemic, war), technological change, climate transition and U.S.–China rivalry have weaponized interdependence and prompted EU policymakers to adopt economic statecraft and “open strategic autonomy.”
• Instruments: New EU tools include CBAM, Critical Raw Materials Act, European Chips Act, Net‑Zero Industry Act, FDI screening, export controls, SMEI, Foreign Subsidies Regulation and the Anticoercion Instrument—each with defensive and/or offensive strategic aims but limited by funding, implementation capacity and internal cohesion.
• Tensions and risks: The approach is fragmented (member states vs. EU), mixes commercial mercantilism with strategic goals, may clash with WTO rules, provoke retaliation, deepen global fragmentation (blocization) and unintentionally harm developing countries and multilateral cooperation.
• Strategic choices: The EU must (a) define clear strategic objectives for economic statecraft, (b) assess political and strategic externalities and trade‑offs, (c) build institutional capacity and funding, and (d) pursue diplomacy and multilateral reform (including negotiating subsidy, climate and security exceptions) to make resilience and autonomy compatible with openness.

 Geopolitics of EU and China Relationship

China’s growing global ambitions and renewed great-power competition are reshaping the EU’s transatlantic strategy. Once seen as a partner, China is increasingly viewed by the U.S. and, more gradually, the EU as a strategic competitor and systemic rival. Four geopolitical trends have driven Europe’s changing stance: intensified U.S.–China competition, uncertainty about sustained U.S. engagement, Russia’s war in Ukraine (and China’s supportive posture), and China’s economic and technological pressure on the EU. These dynamics produce uneven but accelerating European policy shifts—toward “de-risking,” economic-security measures, and closer alignment with the U.S.—while member states navigate trade-offs between economic interests and strategic autonomy. The report offers analysis of these trends’ impacts on EU trade, investment, technology, and security policy and recommends steps for U.S. policymakers to strengthen transatlantic coordination.

Key points

• Evolving view of China: From engagement partner in the 1990s–2000s to strategic competitor/systemic rival for the U.S. and, since 2019, a more skeptical EU stance.
• Four driving trends: intensified U.S.–China rivalry; doubts about long-term U.S. commitment to Europe; Russia’s war in Ukraine (and China’s enabling role), which exposed security vulnerabilities; and China’s state-driven economic/tech competition harming EU industries.
• European response: Adoption of “de-risking” language, new tools (e.g., Foreign Subsidies Regulation, Anti-Coercion Instrument), and an economic-security agenda—implemented unevenly across member states because of differing economic exposure to China.
• Implication for transatlantic policy: Better U.S. understanding of EU dynamics can improve coordination; transatlantic cooperation remains viewed by many Europeans as the best path to meet the China challenge while others press for pragmatic engagement with Beijing.

EU Considering Chinese Telecom Ban on Huaweii and ZTE

The European Commission is weighing measures to force EU member states to phase out Huawei and ZTE telecom equipment by turning its 2020 recommendation on excluding “high‑risk” vendors from mobile networks into a legally binding rule. Proposals include restricting use of Chinese vendors in fixed-line and fiber networks and withholding Global Gateway funding from non‑EU countries that deploy Huawei equipment. The move reflects growing EU security concerns about Chinese suppliers’ ties to Beijing and has prompted industry and diplomatic pushback.

Key points

• Commission Vice‑President Henna Virkkunen seeks to make the 2020 recommendation against high‑risk vendors legally binding, which could trigger infringement procedures and fines for noncompliant member states.
• Measures under consideration extend beyond 5G radio/core networks to fixed‑line and fiber infrastructure and may include curbs on Global Gateway funding for projects using Huawei gear.
• The policy shift responds to national security worries over Huawei and ZTE and uneven EU member responses (some countries already banned vendors, others still allow them).
• The proposal faces resistance from some member states and telecom operators (cost/competitiveness concerns) and draws criticism from China, which warns of economic and political consequences.

 Potential EU Geopolical Strategy Shift Scenario

A decade-long erosion of the post‑war international order, growing US–China economic coercion, and Russian aggression shape Europe’s near-term risks and longer-term futures to 2030–2035. If we consider short‑term dangers (financial, military, fiscal, trade), possible policy can be formulated based on three benchmark risk scenarios (disintegration of cooperation; three‑bloc world; renewed multilateral order), while taking into account policy goals and implications to strengthen Europe’s strategic autonomy, resilience, and leadership on trade and climate.

Key points

• Short‑term risks: possible collapse of the US bond market; Russian escalation against Ukraine or the EU; fiscal crises from populist wins in high‑debt euro‑area members; trade shocks from US–China tension or hostile Chinese actions in East Asia.
• Three possible EU Geopolitical policy scenarios:

1. Retreat/dismantling of international cooperation with rising protectionism (worst for Europe). Also the worst outcome for the global economy.
2. Three‑bloc world (US‑led, China‑led, non‑aligned countries) with partial provision of global public goods; Europe’s position depends on US behaviour and its own choice to align or stay non‑aligned.
3. New multilateral order with restored cooperation and global public‑goods provision (most desirable).

• To hedge geopolitical risk, policy priorities for Europe (next 1–5 years) include: build strategic autonomy from the two superpowers via stronger defence capabilities; technological and financial independence; integrated, resilient energy systems and secure critical‑minerals access; fiscal frameworks that allow flexibility in low‑risk countries.
• International strategy: defend and reform the rules‑based order by building coalitions across Global North and South, with trade and climate policy as immediate priorities. Incidently, this also contribute to benefit of the US and the west in countering China with the Global South.