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Tobias Gehrke: "the details of what counts as ‘de-risking’ are really not clear"

Expert background: Dr. Tobias Gehrke – a European expert on geoeconomics

Tobias Gehrke is a senior policy fellow at the European Council on Foreign Relations, based in the Berlin office. He leads ECFR’s geoeconomics initiative. His areas of focus include economic security, European economic strategy, and great power competition in the global economy.

Before joining ECFR, Gehrke was a research fellow with the Egmont Royal Institute in Brussels from 2017 to 2022, where he covered geoeconomics. He has also been a visiting fellow at the National University of Singapore, the University of Nottingham, and the American Institute for Contemporary German Studies at Johns Hopkins University, Washington DC.

He holds a PhD in political science from Ghent University.


CMG: Since EU Commission President von der Leyen’s policy speech on China in March this year, the term “de-risking” is widely debated in capitals. How do “de-risking” strategies differ between Washington, Brussels and Beijing?

They differ first and foremost in how concrete they are. In Europe, so far it is mainly a strategic guideline, but the details of what counts as ‘de-risking’ are really not clear. In the US, it is clearer for some supply chains. The IRA for example provides subsidies to companies who de-risk their minerals supply chain and sets clear targets for when how much of the supply chain needs to be non-Chinese for instance. This is probably the main difference between Washington and Brussels. China in a way also has clear targets, for instance with its Made in China 2025 industrial plan. In the coming months, we will therefore see more policy efforts by the EU trying to define thresholds and red lines that make de-risking more concrete.

Would you say Europe’s ‘de-risking’ approach is primarily defensive?

De-risking in Europe is currently both framed in terms of protecting certain sectors from external vulnerabilities, but also promoting them to remain competitive. But there is concern among member states that too much focus is on the protect side. Ursula von der Leyen’s cabinet is very “transatlanticist”, and there is a strong focus on US priorities on export controls, technological security, outbound investment screening – that is essentially the nucleus of the new Economic Security Strategy. The private sector is currently very concerned with what is coming out of Brussels, because the Commission has been very poor at communicating that this can be positive.

Jake Sullivan talks about a strong “techno-industrial base” of the US with its like-minded partners. How tightly is the EU cooperating with the US? Was the TTC the “prototype” of this new policy concept?

It can be. Many wanted it to be, but the reality is more complicated.

The TTC was an EU idea to work more with the US on the technology security and trade agenda. There are elements of how to cooperate in strategic industries such as semiconductors. But I think it has not been very successful so far. It is very difficult to cooperate on an allied techno-industrial base, because especially for semiconductors the competition is very intense and everybody wants to control all parts.

The TTC and other similar initiatives talk about industrial tech cooperation whereby work should be distributed, but that is almost impossible, especially in these advanced industries. There is a lot of industrial secrecy, and companies don’t want to share where exactly they are in the supply chain – not with their member states, not with the Commission, and certainly not with the Americans.

What are your thoughts about the debates in the US and the EU regarding outbound investment screenings? How big a “game changer” would their adoption be, and why?

They can have a huge impact. So far, the American Executive Order is very limited, narrow and fairly clear. But more is going to come. There is huge pressure from Congress to do more, especially from the Republican side.

So far, only active investments from VC’s are covered, not passive investments such as ETFs. But there is pressure to also capture such investments. That would be huge, and it would have a big impact on the global economy in terms of global capital flows, affecting technology supply chains, technological development and innovation capabilities. The US government has demonstrated that they can remain as surgical as possible with their policies, but with a lot of “hardcore” voices in Congress, I am afraid this is only the beginning.

Important for Europe – this is likely going to have extraterritorial effects. Some European investors are already affected today. So, for Europe, it is very important to get its own respective policy to be able to steer financial flows in their own strategic interest.

What is in your mind a noteworthy example of a “successful” re- or friend-shoring initiative?

I would say the jury is still out. It is for instance too early to say what the Chips Acts of this world will do. Also, while the IRA and its re- or nearshoring ambitions entail very tight raw material restrictions and the intention is clear, it is also too early. A problem is also here that we have not defined what counts as a success, same as we have not properly defined ‘de-risking’.

A good example are electric vehicles. Europe has targets in its Raw Materials Act to mine and produce more at home, but it is not clear if a Chinese company sets up a battery plant in Europe, as many currently do, whether that counts as de-risking, as it is produced in Europe. Same in the US.

Can you explain what an Important Projects of Common European Interest (IPCEIs) is, plus provide an example to illustrate policy implementation?

An IPCEI is a tool for member states to use specific state-aid rules. State-aid in the EU is heavily regulated. It is one of the founding principles of the single market, so the state-aid that Member States can provide to their companies is very limited. However, if you have market failure that requires upfront public investment for the private sector to come in and invest, there can be a case for state-aid. Today, more and more such market failures or strategic cases arise where we actually do need to put more state-aid upfront to not fall behind on emerging technologies.

IPCEIs are guided by a lot of rules, need a minimum number of member states to participate and include both large and small enterprises. How well this works in practice is debated. They are famously cumbersome, and big companies that in fact might not need that money dominate. The intention, however, is right in my opinion.

One positive example is on batteries. Here, the IPCEI got a lot of industry actors together to build projects along the battery value chain. Still, there is concern that these projects are not fast or powerful enough to compete with similar initiatives in the US or China. That is why the Commission wanted to build a new financial tool that it controls – the "Sovereignty Fund”. But it failed, so IPCEIs remain the main tool.

Considering all these geo-economic dynamics affecting trade and investment, how will global trade and its governance look in 10 years from now in your mind?

Global trade is fragmenting, but the data doesn’t suggest it is deglobalizing. The direction of the US in terms of de-risking and decoupling is a reality, but will be messy.

In terms of governance, I am afraid the EU will lose its battle for the WTO. The WTO doesn’t look like it can be salvaged anytime soon. You can’t build a global trading system that the two main global economies don’t support. That doesn’t mean the WTO will fall apart, but it might be increasingly relegated to the back-bench, as happened for the last 10 years, with continued proliferation of bilateral or plurilateral agreements.

More and more, the demand for economic cooperation is also shifting, from market opening and reciprocity towards an economic security agenda. In place of the WTO, we will see more plurilateral and sectoral agreements, like the chips deal between the US, the Netherlands and Japan, or the US-Korea-Taiwan chips alliance. This is the future: very sectoral, very specific, on a sub-sector of the supply chain for example. Still, the WTO can continue to serve as a very important institution to litigate trade disputes.


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