EU faces geoeconomic setback amidst Russia, China, and US tensions

An article by Foreign Affairs offers a comprehensive examination of the European Union's (EU) struggle to harness its geoeconomic potential amidst rising global challenges.

The EU, despite being the world’s third-largest economy, suffers from internal fragmentation and dysfunction, which hampers its ability to effectively address key economic security issues, such as responding to Russia's war against Ukraine, China's economic coercion, and potential shifts in U.S. foreign policy under President-elect Donald Trump.

The article argues that although the EU has the necessary tools to be an economic superpower—such as control over the euro, vast foreign direct investment flows, and financial sanctions infrastructure—its inability to coordinate and execute policies across its 27 member states remains a major obstacle. The EU’s complex institutional structure, where different countries handle sanctions enforcement differently and lack uniform standards, undermines the bloc's cohesion and effectiveness in economic statecraft. This dysfunction is particularly evident when member states are unable to agree on crucial issues like tariffs on Chinese goods or sanctions on Russia, as seen in the recent German opposition to EU sanctions on Chinese electric vehicles.

The EU’s reliance on the U.S. for policy enforcement and expertise, especially in sanctions and export controls, adds another layer of vulnerability. With the U.S. potentially shifting its approach under Trump, the EU’s dependence on American leadership could diminish its ability to assert its economic autonomy and respond independently to global economic crises.

The article proposes the creation of a European Economic Security Network (EESN), drawing on successful EU models like the European Medicines Agency. This network would centralize knowledge and expertise, promote information exchange, and foster better coordination among member states. While this network wouldn't solve all political divisions, it could improve the EU's capacity to enforce sanctions and navigate its geoeconomic challenges more effectively.

In conclusion, the article emphasizes the need for the EU to strengthen its institutional infrastructure, pooling resources to address shared economic security concerns. Without this, Europe's ability to influence global economic policy and counter external threats will remain compromised. The EU must use its diversity as a strength, creating a unified but decentralized system to enhance its economic security and global standing.