Memo on European Economic Security

What is the European Commission's approach to Economic Security?

On 20 June 2023, the European Commission and the High Representative published a Joint Communication on a European Economic Security Strategy, to minimise the risks to economic security in the context of increased geopolitical tensions and accelerated technological shifts, while preserving maximum levels of economic openness and dynamism.

The Strategy sets out a three-pronged approach:

Promoting the EU's competitiveness, by strengthening the Single Market, supporting a strong and resilient economy, investing in skills and fostering the EU's research, technological and industrial base.
Protecting the EU's economic security through a range of existing policies and tools, and consideration of new ones to address possible gaps. This would be done in a proportionate and precise way that limits any negative unintended spill-over effects on the European and global economy.
Partnering with the broadest possible range of partners to strengthen economic security, including through furthering and finalising trade agreements, reinforcing other partnerships, strengthening the international rules-based economic order and multilateral institutions, such as the World Trade Organization, and investing in sustainable development through Global Gateway.

The Strategy proposes a thorough assessment of risks to economic security in four areas:

the resilience of supply chains, including energy security.
physical and cyber security of critical infrastructure.
technology security and technology leakage.
weaponisation of economic dependencies or economic coercion.

On 24 January 2024 the European Commission adopted a comprehensive trade, investment and research package as part of the roll-out of the European Economic Security Strategy of 20 June 2023.

The five elements of the package

A legislative proposal for the revision of the EU Foreign Direct Investment Screening Regulation to improve its effectiveness and efficiency.
A White Paper launching a process to identify potential security risks linked to EU investment in third countries (outbound investment).
A White Paper on how to make EU controls more effective for export of goods with civilian and military use (dual-use goods), in the interest of upholding international security and safeguarding EU security interests in the context of growing geopolitical tensions.
A White Paper on enhancing support for research and development involving technologies with dual-use potential.
A proposal for a Council Recommendation on enhancing research security.

Enhanced foreign investment screening

The EU benefits greatly from investments from third countries. More than €7 billion of investment by non-EU investors in Europe helps to support EU jobs and economic growth.

However, certain investments might also present a security risk for the European Union. For this reason, the EU has a system in place since 2019 to screen foreign direct investments and against potential risks to its security and public order.

Today's proposal builds on the extensive evaluation, lessons learnt and implementation of current system over the past three years, and aims to improve the existing tool by:

Ensuring that all Member States have a screening mechanism in place and harmonising national rules to make cooperation with other Member States and the Commission more effective and efficient.
Covering transactions within the EU where the direct investor is established in the EU but is ultimately controlled by people or entities from a non-EU country.
Establishing a minimum sectoral scope where all Member States are required to screen transactions.

Monitoring and risk assessment of outbound investments

When EU companies invest in advanced technologies in third countries, there is a risk that these technologies could get into the hands of certain countries who may use EU technology and know-how to enhance their military and intelligence capabilities. This technology leakage could undermine international peace and security.

In summer 2023, the Commission created an Expert Group on outbound investment with Member States. It examines what security risks can result from outbound investments, to analyse gaps in existing trade and security tools and to examine possible measures to address any identified risks. Within this narrow scope of technologies, there is currently no systematic monitoring or control of investments that flow out of the EU to third countries. This creates a substantial knowledge gap around the level of investments, the destinations and the potential risks that could accompany them.

For this reason, the Commission is launching a process to gather data and evidence on those potential risks, via a series of steps which will ultimately decide if and how any further policy response should be formulated:

A 12-week public consultation to gather stakeholder input and views on the monitoring and subsequent risk assessments that Member States would have to undertake;
A Commission Recommendation to Member States in the Summer of 2024, taking into account the outcome of the public consultation, to recommend Member States to monitor outbound investments in critical technologies for a 12-month period and then report to the Commission and other Member States.
A shared risk assessment based on the findings of the monitoring, undertaken by the Commission and the Member States to determine whether the monitored transactions bring risks to EU security.
The Commission and the Member States will formulate adequate policy responses, if needed.

More effective controls of exports of dual use goods

It is critical for international security that EU goods and technologies with both civilian and military uses do not get into the wrong hands. This is the logic underpinning the existing multilateral rules that seek to prevent exports of specific goods and technologies to countries of concern, where these could cause a risk to international security or could be used for violations of human rights. Russia's war of aggression against Ukraine, and geo-political tensions more generally, have highlighted the need for an effective, uniform EU approach. Today's White Paper on export controls aims to launch a discussion on the current EU export control system and sets out actions to address some of the existing gaps. The White Paper proposes to:

In the short term, consider alternative approaches to introduce uniform EU controls for those items that have been agreed with partners at multilateral level, even if they could not be formally adopted due to the blockage of the multilateral decision-making process by certain countries.
Create a forum for political level coordination on export controls between the Commission and Member States to foster common EU positions. Adopt a Recommendation by summer 2024 to improve coordination at technical level between Member States and the Commission on new National Control Lists of dual-use items before they are adopted by individual Member States. This would improve the EU's capacity to identify security and supply chain risks for the Union as a whole.
Advance the planned evaluation of the Dual-Use Regulation to the first quarter of 2025.

White Paper on enhancing support for research and development involving technologies with dual-use potential

Many technologies that are critical for the EU's economic security and strategic autonomy have a dual-use potential: these technologies are relevant for many fields in both civil and defence domains and could benefit European industry and the wider economy.

The White Paper adopted today reviews and assesses the existing research and development support offered under current EU funding programmes and launches a public consultation. The Commission invites public authorities, civil society, industry and academia to a comprehensive dialogue based on the following options:

Going further based on the current set-up: this option would build on the current approach characterised by an exclusive focus on either civil (through Horizon Europe) or defence applications (through the European Defence Programme). It would introduce incremental improvements that can already be tested in the current EU funding programmes.
Remove the exclusive focus on civil applications in selected parts of the successor programme to Horizon Europe: this option would allow supporting strategic emerging technologies independently of the field of application (defence or civil) in selected parts of the programme – subject to specific conditions. At the same time all other parts of the programme would maintain an exclusive focus on civil applications.
Create a dedicated instrument with a specific focus on research and development with a dual-use potential: such an instrument would be devoted to research with dual-use potential, while the civil and defence research and development programmes would maintain their mutually exclusive focus.

The consultation is open for comments until 30 April 2024.

Proposal for a Council Recommendation on enhancing research security

Research security refers to risks related to the international nature of scientific research. These risks arise from sharing sensitive knowledge and technology, which can jeopardise European and national security if channelled to military purposes by a foreign research partner. Another risk is that EU academic education and research can be improperly influenced by or from other states. The third research security risk occurs when technologies are used to suppress or undermine fundamental values, both in the EU and elsewhere.

The level of awareness of these risks is not even across the EU. An increasing number of Member States and research stakeholders is developing policies, while others seem largely unaware. This creates vulnerabilities that could easily be exploited and that can hinder the functioning of the European Research Area.

Today, the Commission tables a proposal for a Council recommendation in order to offer the Member States and the research and innovation sector more clarity, guidance and support. It presents principles for responsible internationalisation that should underpin all research security policies, recommends practical safeguarding measures to Member States, research funding organisations as well as research performing organisations, and outlines support actions at EU level.

For more information

Press release

Communication: advancing European economic security: an introduction to five new initiatives

Proposal for a Council Recommendation on enhancing research security

White Paper on options for enhancing support for research and development involving technologies with dual-use potential

White Paper on export controls

White Paper on outbound investment

Proposal for a new regulation on the screening of foreign investments

Factsheet - Proposal for a Council Recommendation on enhancing research security

Factsheet - White Paper on options for enhancing support for research and development involving technologies with dual-use potential

Factsheet - White Paper on export controls

Factsheet - White Paper on outbound investments