Why has the European Union (EU) recently turned to “geoeconomics”, that is, the use of economic instruments for geoeconomic purposes? While China and the United States have been using geoeconomic tools for a long time, this is a rather new development in the EU, which has built its power on exporting free trade and multilateralism and on subsuming geopolitics to international economic liberalism. In the current issue of Foreign Affairs, professors Sophie Meunier (Princeton) and Matthias Matthijs (Johns Hopkins) offer an explanation of Europe’s ”geoeconomic revolution”.
They begin with an overview of the European Union’s historical stance regarding geoeconomic strategy, highlighting Europe’s long-held belief in “the liberal international economic order,” free trade, and interconnectedness through economics. Recently, however, the European Union has taken a real geopolitical turn, as seen in the leadership and assertiveness of European Commission President Ursula von der Leyen.
Meunier and Matthijs discuss the rise of China’s economic self-reliance strategy and weaponization of economic interdependence, the US’ protectionist and unilateralist turn under the Trump administration followed by the ascent of industrial policy under Biden, as well as technological change, the global pandemic, and the Russian invasion of Ukraine as reasons for Europe’s geoeconomic turn. The article tracks the development of geoeconomic tools in Europe, citing, among others, pandemic-response “eurobonds” and a stimulus package (“a lasting break with fiscal austerity”), new European investment screening efforts, the establishment of the International Procurement Instrument, and the development of anti-coercion measures. Furthermore, the European Union’s new economic security strategy indicated Europe’s search for “like-minded countries” (term quoted from article) and desire for resilience to, and distance from, China and Russia.
Despite Europe’s sharp geoeconomic turn, Meunier and Matthijs identify challenges the EU faces in solidifying this new stance. These include concerns about voter support for new measures, disagreement between EU Member States and EU commissioners on a variety of economic topics, and the reality of close economic ties between Europe and China and the accompanying geopolitical challenge of escaping these. Additionally, Meunier and Matthijs question how Europe can maintain effective geoeconomic strategy and “strategic autonomy” without a robust military presence alongside.