Editor's Note: Greetings! The past week has been eventful as Brussels initiated an anti-subsidy probe into Chinese EVs and unveiled a more detailed economic security strategy. You can read the chamber's statement on the Commission's anti-subsidy investigation here. In this edition of CCCEU Weekly Update, we will delve into how the EU outlined its economic security strategy earlier this week. Enjoy your reading, and have a nice weekend.

▶︎  Focus

The European Commission's "Economic Security" strategy has been under discussion for several months, with its lack of clarity generating ongoing controversy. This strategy encompasses two significant policy thrusts for the EU: firstly, bolstering regulations on foreign direct investments in critical sectors, and secondly, enhancing oversight of European investments in high-tech sectors abroad.

The enigma of the EU's "Economic Security" strategy lies in the specific areas the EU plans to restrict inbound and outbound investments. It is foreseeable that these areas may become focal points for future trade or investment disputes between Europe and China. This week, we have gained some insight into this enigma, as the EU has disclosed the key industries under assessment for their susceptibility. However, the subsequent actions to advance this strategy seem still in a state of uncertainty.

On 3rd October, the Commission adopted a Recommendation on critical technology areas for the EU's economic security, for further risk assessment with Member States. This Recommendation stems from the Joint Communication on a European Economic Security Strategy that put in place a comprehensive strategic approach to economic security in the EU. These areas were selected based on the following criteria:

·Enabling and transformative nature of the technology: the technologies' potential and relevance for driving significant increases of performance and efficiency and/or radical changes for sectors, capabilities, etc.;

·The risk of civil and military fusion: the technologies' relevance for both the civil and military sectors and its potential to advance both domains, as well as risk of uses of certain technologies to undermine peace and security;

·The risk the technology could be used in violation of human rights.

Thus, the commission outlined 10 "critical technology areas" for the EU's economic security

List of 10 critical technology areas for the EU's economic security

The recommendation includes some guiding principles to structure the collective risk assessments, including consultation with the private sector and protection of confidentiality.

At this stage, the European Commission has not confirmed whether it will impose restrictions on foreign investment in these areas or outbound investments in the future, emphasising that this strategy is not directed at specific countries. However, European media widely perceive the EU's "economic security" strategy as highly targeted and a significant vehicle for risk mitigation, particularly in relation to China.

According to the Financial Times, some EU member states have reservations about this proposal and the effectiveness of collective assessments, especially considering that technologies such as artificial intelligence and quantum communications are still evolving, making it challenging to accurately assess their vulnerabilities.

The Commission may present further initiatives in this respect by Spring 2024, in light of such dialogue and of the first experience with the initial collective risk assessments, as well as of further inputs that may be received on the listed technology areas.

According to the recommendation, the Commission may present further initiatives in this respect by spring 2024, in light of such dialogue and of the first experience with the initial collective risk assessments, as well as of further inputs that may be received on the listed technology areas.

▶  Hot Topics

>>EP approves an anti-coersion instrument

With 578 votes to 24 and 19 abstentions, the European Parliament approved on Tuesday the Anti-Coercion Instrument (ACI). Its statement said that the new trade instrument aims to enable the EU to respond when the EU or member states face "economic blackmail" from a foreign country seeking to influence a specific policy or stance.

>>Nobel Prize announced

According to the Associated Press, the annual Nobel Prize announcements are almost over, with five of the six awards unveiled so far by prize committees in Stockholm and Oslo. Imprisoned activist Narges Mohammadi won the Nobel Peace Prize on Friday for her campaign against the oppression of women and for human rights in Iran. First up in the week was the Nobel Prize in medicine, which was awarded Monday to two scientists whose discoveries enabled the development of mRNA vaccines against COVID-19. On Tuesday, three scientists won the physics prize for their work on how electrons zip around the atom in the tiniest fractions of seconds. Three U.S.-based researchers shared the chemistry prize on Wednesday for their study of quantum dots—tiny particles that can release very bright colored light and are used in electronics and medical imaging.

>>EU strapped for staff to combat Chinese subsidies

According to Politico, the European Commission has only a handful of staff in place to enforce new rules on foreign state funding for companies as the European Union toughens its stance against what it sees as unfair competition from global rivals, particularly China.

The Foreign Subsidies Regulation (FSR) requires companies to notify subsidies they get from non-EU governments, and, from next week, it will also oblige companies to flag deals involving foreign state funding exceeding certain thresholds. Most of the work is due to be handled by the Commission's competition department, with some responsibilities handled by the trade department. But the Commission's task force on foreign subsidies, also known as the competition department's unit A5, may only have as few as five people. The commission had originally asked for 145 staff to enforce the rules across both departments, the report said.

>>EU foreign ministers meet in Kyiv in show of support to Ukraine

AFP reported that EU foreign ministers gathered in the Ukrainian capital, Kyiv, on Monday for a historic summit outside the bloc's borders. The meeting took place as Kyiv pushed to join the EU in the future.

"This is a historic event because for the first time ever, the foreign affairs council is going to sit down outside of its current borders—outside the borders of the EU – but within future borders of the EU," Ukraine's Foreign Minister Dmytro Kuleba was cited as saying.

>>China is the EU's third-largest trading partner in agri-food

China is the third trade partner of the EU, representing 6% of EU imports and 7% of EU exports in 2022. The trade balance with China is positive and reached €6 billion in 2022, official data showed.

The UK is the top agri-food trade partner of the EU, covering 9% of EU imports and 21% of EU exports in 2022. The EU trade balance with the UK reached €32.6 billion in 2022. The US is the second-largest trade partner of the EU, representing 7% of EU imports and 13% of EU exports in 2022. The EU trade balance with the US was positive (+€16.7 billion) in 2022.

▶︎ What are experts talking about？

European Union debt financing: leeway and barriers from a legal perspective

Source: Bruegel Think Tank

Author: Sebastian Grund Armin Steinbach

We explore legal leeway for two approaches to debt-financing European Union spending: creation of extra-budgetary, one-off and temporary EU funds to finance European public goods (similarly to NextGenerationEU), and debt-financing the EU's regular budget, hence creating an on-budget, permanent borrowing capacity at EU level.

NGEU could in principle be replicated. This would require an amendment to the Own Resources Decision (ORD) – a unanimous Council decision that designates the main sources of EU financing and requires ratification by each member state – to authorise borrowing and specify how the borrowing proceeds are to be used. However, this approach would be constrained by the legal requirement that financing EU spending through 'other revenues' (as opposed to 'own resources' designated as such in the ORD) remain exceptional.

While EU primary law does not stop the EU from debt-financing its budget, the scope for EU borrowing would remain severely limited compared to a sovereign state. The permissible amount of borrowing must be specified in the ORD and the EU must be able to meet its debt service in any year, which must be secured by a sufficient amount of (non-borrowed) own resources.

The 10th Anniversary of BRIs

Source: China-US Focus

Author: Li Yan

This year marks the tenth anniversary of Chinese President Xi Jinping's proposal to build the "Belt and Road Initiative (BRI)" and the "21st Century Maritime Silk Road." From the perspective of the evolution of the international situation, the BRI has played an important role in promoting world peace and stability, with three significant achievements.

In the specific practice of promoting the BRI, China has always adhered to its policy of openness, cooperation, and mutual benefit, making it an important support for implementing the concept of a community with a shared future for mankind.

Compared with some countries that talk big about "great power competition" and engage in group confrontation, the BRI, with its advanced concept, has played a positive role in consolidating peace consensus among countries and ensuring that world development is on the right track.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.