Why European Economic Security Must Account for China and US Risks

Until the American elections, it seemed that Russia and China posed the most immediate challenges to the economic security of the European Union. But the next US presidential administration holds the most power to disrupt the EU's new economic security strategy.

The US has presented Europe with two seemingly opposite faces in contending with China's economic might, one coercive and the other cooperative. During the first Trump administration, and against the backdrop of a rapidly expanding US-China trade war, the US forcefully compelled or bullied European governments and businesses to go along with US-led decoupling polices. This was clearest in US efforts to get EU governments on board with restrictions on Huawei and its role in European 5G infrastructure. Under the Biden administration, the US eschewed such baldly coercive measures and instead emphasized diplomatic cooperation with Europe in the name of shared economic security and measured de-risking from China.

Some positive appraisals of the Biden approach have pointed to effective cooperation with the Netherlands and Japan on semiconductor export controls to China. Yet even such diplomacy-led collaboration has not been all smooth sailing. No matter who won the election, the US was unlikely to curtail the politicized and ever-expanding range of "security" concerns driving its approach to economic security. And even countries most willing to work with the US have long had different risk assessments and economic realities that expose a gap between their and US interests.

The case of the Netherlands provides a clear window into these realities. During Trump's first term in office, the United States started to restrict China's access to advanced semiconductors and related technology. That work involved not only countries that produce semiconductors, such as Taiwan and South Korea, but also those making equipment needed to make chips, such as the Netherlands. In 2018, the Trump administration began talks with the Dutch government about limiting exports by ASML, the world's leading producer of chipmaking equipment, to China. A year later, the Dutch government halted the export of the company´s most advanced equipment to China. Under President Biden, the US maintained pressure on the Netherlands that led to further restrictions on ASML's sales in China.

Helping the US entails costs for the Netherlands. ASML is the EU's largest tech company. As a result of consecutive restrictions imposed by the US, ASML can now sell to China only its older models of chipmaking equipment. This is of particular significance at a time when orders for new equipment in some of its other major markets are less than expected. When it comes to economic security, it can be difficult for US allies and partners to assess and respond to America's combination of cooperation and coercion. Maintaining good relations with the US is generally beneficial for smaller countries, which understand that the US government has financial, economic and diplomatic means to exert pressure on them if needed.

If the Dutch experience with ASML is any indication, US allies and partners should expect the new administration to prefer coercive over cooperative means in pursuit of a China-focused economic security front. That could include efforts to deepen controls on ASML itself or to revive pressure on European countries to restrict the activities of Chinese tech companies, including Huawei. As a result, the EU should make sure its tools to protect and promote its economic security are applicable not just to China and other non-Western actors but also to its relationship with the US. The EU must rapidly adapt its Anti-Coercion Instrument, which is aimed at deterring and responding to economic coercion by third countries, in order to protect not just the governments of its member states but also their companies. This would not be as big a stretch as some might imagine, since EU thinking about anti-coercion policies began with a focus on the US during the first Trump administration.

By Matt Ferchen and Frans-Paul van der Putten.

This article was first published on 19 November 2024 by Le Monde English as "'The next US presidential administration holds the most power to disrupt the EU's new economic security'". Click here to go to the website of Le Monde.