The chapter “A New Foreign Economic Policy” in Ursula von der Leyen’s Political Guidelines as a candidate for President of the European Commission begins with a significant observation: in today’s world, geopolitics and geo-economics are closely linked, and Europe’s foreign and economic policy must reflect this. This demonstrates how developments outside Europe significantly impact EU trade policy and play a crucial role in shaping its political strategy.

GEOPOLITICS AND GEOECONOMICS

The geopoliticisation of economic policies is understood as the process by which issues once addressed through free-market logic are now framed in terms of global power rivalries and strategic objectives. 

This process is thus characterised, as von der Leyen points out, by a closer connection between economic and foreign policy, which previously could and should have remained quite separate spheres. 

Admittedly, the European Project, with its backbone being the Single Market, has become a major global trading power within the framework of rules-based multilateralism. This has occurred in a global order dominated by the United States. In this context, there has been no established link between the free expression of market forces and the implications of international politics.

Ursula von der Leyen is aware that the EU will have to compete “in a world shaped by the struggle for technological advantage, the militarisation of economic dependencies and an increasingly thin line between economy and security. We must be aware of these risks. We need a new economic foreign policy for today’s realities”.

In this new order, considerations of relative gains, international political positioning, national interest or security take precedence over the benefits of economic interdependence arising from free markets and international authority. This more fragmented world economy has been effectively encapsulated in the term ‘weaponised interdependence’, which describes a growing tendency for great powers to use global economic networks to pursue their own strategic objectives.

This change foreshadows a shift in the European Project's direction. While officials in the EU’s Directorate-General for Trade have traditionally seen interdependence as a sign of wealth, stability, and security, the globalized world has revealed its limitations and risks. It has now become a source of vulnerability, prompting the need to reduce dependencies and take advantage of those of adversaries. 

“Geopolitics is slowly muscling free-market relations out of the way”.

THE PILLARS IN THE NEW FOREIGN ECONOMIC POLICY

“The three central planks of this will be economic security, trade, and investment in partnerships”.

A first reflection seems important: the reference to Open Strategic Autonomy, the fundamental concept that has characterised European trade policy in recent years and allowed neo-liberalism to be extended even as international tensions emerged, disappears from the Commission President’s policy guidelines. Now, the geo-economic turn takes on a more pronounced and decisive emphasis.

It is more challenging to identify a common thread among geo-economic policies compared to the market-liberal policies that inspired the creation of the European Single Market. The new measures are characterised by the fact that their primary motivation is not mutually beneficial economic gain, but the geostrategic advantage they can bring to one of the involved parties: they aim at relative rather than absolute gains. Such policies bring the state back as the primary actor in international economic relations.

However, as the European Union is not a state, this new geo-economic approach presupposes and will necessitate a strengthening of the Union's foreign policy competences. A wide range of measures will be introduced or reinforced to protect and promote the Single Market in competition with strategic rivals, as well as reevaluating trade partners on a geopolitical basis. 

CONSEQUENCES AND RISKS

The Commission President's words appear to set an inevitable path. However, those who have grown up in the neo-liberal world cannot help but ponder deeper uncertainties.

The decline of the neo-liberal system threatens to slow down the economic and social progress that has been made, or even reverse it. In the new world (dis)order, there is a risk that business could descend into anarchy, promoting banditry and violence. Without mutual trust and an institutional framework for cooperation, it will become more arduous for countries to address the challenges of the 21st century. Managing the arms race in the era of artificial intelligence, addressing climate change, and fostering cooperation in space are and will be priorities that concern all of humanity, rather than opposing blocs.

On the other hand, if issues are addressed by groups of like-minded countries, there is a risk that this will be accompanied by coercion and resentment, as seen in the case of American tariffs on steel and aluminum or European tariffs on Chinese electric cars. When cooperation gives way to pressure and power struggles, countries have less incentive to maintain peace.

CONCLUSION

Geopolitical competition involves a significant shift from the EU being seen primarily as a regulatory or market power. Despite having limited military capabilities, the EU has historically used economic tools to influence the behavior of other international players. Its strength lies in the appeal of its large market, sophisticated regulatory system, and liberal policies.

In contrast, geo-economic power is a more direct form of influence that relies on using economic means to achieve geopolitical objectives, rather than exerting influence indirectly through multilateral institutions and international law. It's important to note that geopolitics also involves the development and display of military strength.

The landscape of geopolitical competition appears to be shifting, even as the traditionally more hesitant EU takes on a leading role.

About the author

Filomena RATTO was a student in our European Political and Governance Studies Department (Bruges campus).

After graduating in 2024, she started working at the European Commission as a Blue Book Trainee in the Directorate-General for Internal Market, Industry, Entrepreneurship, and SMEs (DG GROW).