A New EU Paradigm: Prioritizing Economic Security?

Fabian Zuleeg, Chief Executive and Chief Economist at the European Policy Centre, reflects in his essay on what mistakes can be made in analyzing economic security issues.

For decades, Europe’s economic model rested on a simple premise: openness delivers prosperity, and interdependence fosters stability. That premise no longer holds true consistently. In today’s geo-economic environment, openness can be weaponized, dependencies can be exploited, and supply chains can become channels of coercion.

Europe still depends on openness for prosperity, innovation, and influence. But this means that openness must be assessed not only by its efficiency gains, but also by the vulnerabilities it creates and the contingencies it may trigger.

Economic security is not just another policy add-on but a ‘new EU paradigm’ that requires a long-term effort to change policymaking, identify critical systems, draw up contingency plans and invest in an analytical capability to anticipate.

Economic security cannot be analyzed adequately through standard models that assume stable preferences, observable risks and depoliticized exchange. Here intentions matter, policies change, and trust can erode quickly, so the relevant question is not what is efficient today but what leaves you exposed tomorrow.

Intentions are hard to observe; they can shift quickly and may be deliberately concealed. In this sense, economic security is closer to decision-making under strategic uncertainty than to textbook economics.

Like-mindedness is the basis of cooperation. This may be functional, where countries’ interests align on a specific issue. It may enable pragmatic cooperation. But deeper openness, including the acceptance of mutual vulnerabilities, depends on value-based trust. However, such trust can only be maintained on the strict condition that the countries involved must be equally committed to the underlying principles.

The more cooperation depends on trust, the more it depends on whether partners are merely functionally aligned on one issue or genuinely committed to the same political and economic principles over time.

These words of Fabian Zuleeg can be illustrated with an example: the drastic change in Washington’s policy under the Trump administration showed how vulnerable such trust may be as regards economic security.

In analyzing economic security issues, it is important to avoid two types of errors. A Type I error is failing to act when there is a real security threat. In this context, it means leaving yourself exposed to coercion, disruption or strategic dependency because you judged the threat to be too low or too remote.

A Type II error occurs when the perceived risk is overstated or misunderstood. This means imposing unnecessary restrictions, raising costs, reducing competitiveness or damaging cooperation when the underlying threat was not serious enough to justify the intervention.

To develop the author’s ideas, we can add that the EU leaders have erred both ways. In the former case, they underestimated the growth of their strategic dependence on financial instruments and energy from the USA and on supplies of manufactured products from China. In the latter, they exaggerated the risks emanating from Russia – to restrict their own capability with sanctions and thus to strengthen their dependence on the USA.

Source: https://epc.eu/publication/conditional-openness-contingent-security-and-wicked-trade-offs/