As a new European leadership will take the helm later this year, a critical challenge will be formulating a policy agenda that effectively addresses the EU’s industrial vulnerabilities, while enhancing its global stature and development impact. In this commentary for our series ‘To the new leaders of Europe’, San Bilal argues that bridging the EU’s domestic and international policies more effectively is essential to achieving its geostrategic and development goals.
In a fragmented world characterised by poly-crises, geopolitical tensions and increased rivalry, the EU seeks to strengthen its own standing, at home and internationally. This ambition was stressed only a few days ago again by France, Germany and Poland in a joint statement calling for a strong, geopolitical European Union, echoed in an op-ed by France’s president Emmanuel Macron and Germany’s chancellor Olaf Sholz.
To achieve this, the EU is focusing on boosting its competitiveness, deepening the single market, as argued by the Letta report, developing the Union’s capital market, and pursuing a more active industrial policy and innovation, building on the EU’s digital and green twin transition. It means making the European economy and supply chains more resilient, diversifying sources of supply and export markets, including through near-and-friend-shoring, fostering the EU’s open strategic autonomy and ensuring access to reliable sources of (green) energy and critical raw materials.
For an increasing number of European and national politicians the main goal is to enable the EU to better defend its own interests and become stronger at home and more assertive on the international scene. With the Russian invasion of Ukraine and Israel’s Gaza war, security issues are also gaining prominence on the EU’s agenda.
One key challenge for the new European leadership will be to articulate a policy agenda that better addresses the EU’s industrial vulnerabilities in a way that fosters jobs and social prosperity at home while building on the EU values and principles and promoting the EU’s standing internationally. In short, it will need to better connect the EU’s internal policies to their external dimensions.
It will also mean harnessing European economic and private sector forces. This can be achieved through smart, proactive policy interventions and support – at home and internationally – and better responses to economic nationalism and economic security imperatives (including trade defence, foreign subsidies, digital security, foreign direct investment screening, export and outward investments controls, and new instruments to counter economic coercion). In doing so, the EU aims for its economy to become more resilient, de-risking its supply chains and fostering partnerships with like-minded and multilateral actors.
A systemic change
What does it mean for the EU’s external economic agenda, and in particular for its international development policy? The EU and its member states are the leading trade and investment partners of many developing countries and remain the main global providers of international development cooperation and finance. The EU has collectively been a key driver of the international green transition and sustainable development agenda, anchored in human rights and democratic values and high-quality standards.
In pursuing a more geostrategic agenda in its external relations, the EU and its member states should seek enhanced coordination and complementarity between their economic engagement and development objectives. While imperative, this is not straightforward.
The EU’s Global Gateway strategy has paved the way for such an EU’s comprehensive developmental geostrategic approach. While it has often been presented as a battle of narratives and an alternative to China’s Belt and Road Initiative and global influence, particularly in developing countries, the ambitions are broader than a branding exercise and communication strategy around the EU’s hard and soft infrastructure investment agenda. Indeed, the Global Gateway entails the first steps towards a systemic change in the EU’s external action, based on the EU’s self-interests and a geoeconomic approach mutually beneficial to the EU’s strategic partners, as recently articulated in a leaked internal memo by the European Commission.
Aligned to and serving the Sustainable Development Goals (SDGs) and environmental, social and governance (ESG) standards, the purpose is to promote and leverage European economic, business and financial interests in engaging developing countries around the world. European private sector actors and interests are called to play a prime role in this exercise, embedded in broader EU geostrategic considerations, as articulated for instance in the EU Global Outreach Strategy and its comprehensive partnership ambitions.
Reconciling development and self-interest perspectives
The evolution of the EU’s external actions is not without controversy. On the one hand, development cooperation actors, traditionally segregated from geostrategic and self-interest considerations (officially at least), are afraid of a dilution of the aid effectiveness agenda and development principles and values and of the EU aid being captured by European vested interests. Some are calling the Global Gateway ‘a sell-out of international cooperation’.
On the other hand, some argue that in promoting sustainable investment, private economic interests should prevail, that the EU has been too naive and that it should seek to restore a level playing field, not only with its systemic rivals (read China) but also with some of its like-minded partners among the other OECD and G7 countries (think about the US and Japan for instance). In doing so, there might be a tendency for some to argue that as long as external actions and investments are aligned with the SDGs and net-zero ambitions, it does not matter that much whether the public support comes from development cooperation and finance or from economic diplomacy.
While private sector engagement is essential in pursuing a developmental and geostrategic investment agenda, it cannot be done through development or economic diplomacy tools alone, or a confusing, undifferentiated mix of the two. For the EU to be effective and remain aligned with its principles and values, it must improve the coordination and articulation of the range of its external action tools, including through a smart balancing of its development cooperation, development finance, and non-development public support to investment and trade promotion.
By better complementing its development tools and economic security/diplomacy tools while ensuring a differentiated approach, the EU will avoid the tied aid pitfalls and contribute to further distinct itself from its geopolitical competitors, providing a more transparent, value-based and principle-driven approach. This will ultimately be more impactful and mutually beneficial for Europe and its partners.
A first step in that direction was the creation of the European Commission Expert Group on Enhanced Coordination of External Financial Tools in January 2024, which held its second meeting on 28 May. The group brings together European export credit agencies (ECAs) and development finance institutions (DFIs) with EU member states’ representatives and European Commission officials. The idea is to share knowledge and practices, bridging the two communities of DFIs and ECAs, to identify measures the EU could take.
Professor Andreas Klasen – a world-leading expert on ECAs – and I have been tasked to jointly help inform and advise the European Commission and the group on possible ways forward. This is the technical, more practical dimension of a broader systemic shift to seek greater complementarity between European developmental and geostrategic endeavours.
More fundamentally, it requires the adoption of a whole-of-EU approach, and at member states’ level, a whole-of-government approach, to address European external relations in a more comprehensive manner, along clearly defined geostrategic and mutually beneficial objectives, aligned to the SDGs and climate ambitions. It also requires a proactive engagement with the European, local partners’ and the international private sector, including smaller actors, tackling in a coherent manner supply and demand side issues, a topic Karim Karaki addresses in the next commentary in the series ‘To the new leaders of Europe’.
About the author:
San Bilal is a senior executive, Associate director – sustainable economies and climate action