Webinar Summary: Measuring the Economic Impacts of the EU’s Approach to Strategic Autonomy

On November 29, ECIPE hosted an expert discussion around the study’s launch by Frontier Economics, “Measuring the Impacts of the EU’s Approach on Open Strategic Autonomy”.

Amar Breckenridge, Frontier’s lead on international trade policy and lead author of the study, highlighted that concerns about strategic autonomy are not new and have been around since the 1980s with international competition in manufacturing with Japan and East Asia. Referring to the analysis conducted by Frontier, he argued that strategic autonomy “acts as a ‘tax’ on the EU’s external trade and induces a fall in extra-EU trade that is not compensated with a rise in intra-EU trade. The main drivers of effects are policies that are instruments of ‘murky protectionism’, distorting competition”.

Mr Breckenridge further highlighted that strategic anatomy policies could create annual losses in GNI of between US$ 12-22 billion (0.08% and 0.15% of EU-27 GDP). “These are static effects. Including dynamic effects on productivity and innovation associated with trade impacts could lead to 3-5 times larger effects.”

The effects are not evenly spread across the EU-27. Larger member states are less exposed than smaller ones. Mr Breckenridge noted that larger countries like France and Germany are generally less impacted than smaller ones, notably Ireland and the Baltic states.

“The impacts on Ireland are close to 4 times bigger than they are for France, the impacts on Estonia close to twice those on Germany.”

Bettina Rudloff, a Senior Associate at the German Institute for International and Security Affairs (SWP), highlighted the risk of creating intervention spirals. Mrs Rudloff outlined that “the notion of strategic autonomy in agriculture started in the 1950s to increase EU food security. It has resulted in a spiral of interventions, including implementing guarantee prices and public purchases, tariffs, and export subsidies, ultimately causing the destruction of stock surpluses of products such as butter”. Such actions resulted in inefficiencies, budget pressure and international spillovers for competing actors. Mrs Rudloff noted that one should learn important lessons from policymaking in the food and agricultural sector, especially in the areas of subsidies and other forms of state aid.

Nigel Cory, Associate Director for Trade Policy at the Information Technology and Innovation Foundation (ITIF), argued that “the frustrating part of debates around strategic autonomy is the lack of analysis, specificity and limited cost-benefit analysis”. Referring to the rise of EU protectionism and regulatory fragmentation, he outlined that the WTO’s use and relevance may be waning. Its core principles of nondiscrimination are still valuable as we look at and assess the policies that fall under the umbrella of strategic autonomy. He highlighted the example of protectionism in EU digital policymaking and argued that new EU considerations of an EU-wide cloud security regime are based on a very restrictive French Cloud proposal which is more akin to China’s approach to the cloud market than it is to anything else. It clearly defines sovereignty as local control and ownership. That means a cloud provider would need to be locally [EU] owned and locally [EU] controlled for a cloud provider to be deemed trusted.

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Watch a recording of a debate here. You can read the Frontiers Economics report here.