Mitigating the impact of geopolitical crises

Recommendations for the European legislative period 2024-2029

The world has entered a new phase of globalisation. It is characterised by increasing geopolitical upheaval and an even greater localisation of production in all major markets. Not only European companies are localising their production; it is a global trend. This development has been accelerated by the systemic competition with China and the sanctions against Russia, due to their attack on the Ukraine. De-risking is the order of the hour, i.e., diversifying economic relationships and value chains. How can we achieve this in Europe?

Find a new balance between sustainability requirements and strategic economic interests in FTA negotiations

To support the diversification of supply chains, the EU should provide more incentives for dynamic economic relations with developing and newly industrialising countries in the role of equal partners. The EU should prioritise finding pragmatic and innovative solutions in FTA negotiations, to achieve its ambitious goals in areas such as the environment, human rights, and labour standards. This was, the EU would be capable of completing agreements with partners including the Mercosur countries, India, and Indonesia.

Launch new initiatives for trade and investment

Now that rule-based trade within the WTO has stalled, the EU should take a leading role in strengthening the multilateral trading system. The Free and Fair Trade and Investment Club proposed by the Business7 group (B7) under the Japanese presidency, centred on the G7 members and the EU, could serve as a blueprint for a high-level framework for trade and investment. The Club should be open to all countries and regions that agree to fulfil certain criteria within a certain period. In return, each club member is encouraged to grant national treatment to the other members as far as possible. The strategic goal of such a club should be to make an attractive trade and investment policy offer, especially to all those countries that could become important partners outside the G7 group. Diversification and rule-based trade need a powerful signal for that the aim is joint, sustainable, and global growth. It is therefore crucial that Europe strongly commits to emerging and developing countries.

Speed up the implementation of global gateway projects

The planned business advisory council should advocate better funding for global gateway. Looking at the current migration situation, Africa and the Levant region should be strengthened economically and linked to one another through green transformation and digitalisation projects. In addition, Latin America and the Caribbean should be more involved in the awarding of infrastructure projects.

Safeguard the EU-US TTC against political shifts

The EU should encourage the TTC to produce more concrete results, such as the development of common standards for new technologies or the conclusion of further agreements on the mutual recognition of conformity assessments. Not only is this important to safeguard the interests of all stakeholders, but also to protect the TTC as much as possible against political shifts on both sides of the Atlantic.

A common European stance vis-à-vis China

The German federal government's China strategy has reaffirmed the European consensus on China's role as a cooperation partner, competitor and systemic rival and confirmed that a common European approach to China is crucial for Germany. The European Commission must step up its efforts to promote a unified European policy on China and achieve a closer coordination between the member states on China-related areas or issues, to make the EU fit for the future and more competitive.

Do justice to Africa's increased geostrategic importance

A close cooperation between Europe and Africa represents a strategic importance for both the German and European industry. It is important to be strong on the global markets and to counteract one-sided dependencies through broad diversification. The EU should strengthen the African continental free trade area. Europe should also forge sustainable raw material alliances with African partners quickly. Furthermore, Africa's great potential in the production of green hydrogen must be utilised, to benefit both sides. In several areas of the hydrogen value chain, European companies are well positioned as technology leaders. African countries can benefit from this for their own industrialisation. Finally, Europe and Africa should utilise future trends in the industry. For instance, space travel, which could lead to a development policy that focuses more on innovation and the market economy.

Take the lead in Ukraine's reconstruction

The stabilisation of Ukraine is crucial for EU’s security and credibility. The EU must take over a clear leadership role in the reconstruction of the country, also with a view of overcoming possible political challenges in Europe, with a competitive industry 10 Changes in the USA. Legal certainty in the country must be strengthened, as must the instruments for involving and activating private capital. The establishment of a Business Advisory Council (BAC) with the participation of European business organisations and companies, through which a structured exchange between politics and business could take place, is crucial for a successful reconstruction process.

Neither business as usual nor tear down all bridges with Russia

A normalisation of relationships to Russia is currently out of question. The EU should invest decisively in alternative sources of supply, in areas where dependencies on Russia persist. Simultaneously, the EU should actively engage itself in dialogue with the European-oriented Russian opposition and communicate more strongly that only a democratic oriented Russia could once be a part of the European family. Existing contacts, particularly in economic sectors in which the EU is still interested in cooperating with Russia (e.g., climate protection, agriculture), can be maintained while complying with all sanctions. There should be no discrimination towards European companies that are still operating in Russia, in compliance with all existing sanctions. It is not in the EU's interest for all positions in the Russian economy to be filled by investors from countries that do not share the EU's values. Companies that decide to withdraw from Russia should have unrestricted access to advisory services.

Create more efficient EU structures for sanctions

The EU sanctions packages against Russia have shown that the EU needs a more efficient structure like the US Office of Foreign Assets Control to ensure the uniform application of EU sanctions law and the rapid clarification of outstanding issues.

Promote EU neighbourhood policy more actively

A successful EU neighbourhood policy is a key factor for peace and economic prosperity in Europe and geopolitical stability. It is therefore of fundamental importance that the EU invests in relations with its eastern neighbours (e.g., investments within the framework of global gateway) and increases incentives to adopt EU standards and the rules of the EU internal market.

Increase the speed of defence production

From planning and procurement to production, most processes in Europe continue to run in peacetime mode. For all urgently needed defence equipment, administrative processes must be rigorously accelerated at all levels for both the award and execution of contracts, right through to applications for the planning, construction, and operation of facilities.

Ensure access to funding for the defence industry

Access to finance is essential for the ramp-up of production or economic activity in general, especially for small and medium-sized enterprises (SMEs) along the supply chain. Member States should ensure access to finance for the defence industry through their national promotional banks and enable the European Investment Bank (EIB) to finance key defence activities. In addition, the EU should send a clear political message to financial market players stating that security and defence capability is a prerequisite for sustainability and therefore ESG-compliant.

Promote joint procurement of defence equipment in exchange with industry

Given the uncertainties of the Russian war of aggression against Ukraine and the equipment deficits of the member states, examined and decided should be, whether an approach like the joint procurement of ammunition for Ukraine by the EU could also be chosen for other defence equipment, and if so, for which. Early elaboration, communication, and synchronisation of procurement plans, as well as an exchange with companies on requirements (before the tendering process begins), are essential to shorten lead time productions.

Better implementation of skill requirements in procurement projects

The coordination of EU instruments, EU and NATO capability planning processes and member state planning processes needs to be improved. This primarily concerns the proposals regarding joint defence planning, programmes, and procurement.

Increase EU investments in defence

To ensure targeted investments in military and technological capabilities, the EU should consolidate the security and defence budget line in the EU Multiannual Financial Framework (MFF), starting with the current MFF mid-term review. The EU should focus on promoting joint procurement to successfully manage current demand and promote harmonisation of demand across Europe.

Raise Europe's NewSpace ambitions

The EU should primarily act as an anchor customer and award contracts directly to space companies. This includes a greater involvement of the industry along the entire value chain, from system houses, mid-caps, and SMEs to start-ups. In particular, the access of NewSpace companies, especially SMEs and start-ups, to EU programmes must be facilitated to promote innovation and enable more competition.