Current policies to strengthen the EU’s tech competitiveness and autonomy risk back-firing, by closing off vital R&D collaboration with like-minded partners, says GE Aerospace official
This article is part of a series of opinions Science|Business is publishing on the EU’s strategic autonomy agenda, and its impact on global R&D. A complete report will be published and discussed at the annual Science|Business Network conference 7 February.
“Strategic autonomy” is one of the hottest policy memes in Brussels lately. But depending on whom you ask, the term could mean anything. And that’s a problem for any tech-based business in the EU.
While the EU has been on a path of implementing a doctrine of strategic autonomy since 2017, there is still no common understanding of the term. It has been invoked to exclude some R&D partners from EU funding, to justify a boost in state aid subsidies, to write new digital market laws and, most recently, to push for a new European Sovereignty Fund.
More generally, the term has come to be understood as one or all of the following: technological sovereignty (regain the technological edge in the EU), operational sovereignty (reduce non-EU dependency and interference) and strengthening the competitiveness of European industry. It is particularly manifested in European defence policy, with a significant push towards incentivising multinational R&D and procurement in Europe in a way that favours EU-based industry and EU capabilities. While this doctrine is forcefully being driven by a handful of EU member states, there are also others that remain sceptical and see the EU’s future more closely intertwined with its allies.
Today, the concept of strategic autonomy has also spilled over into other domains, such as space, digital, R&D (in the EU’s flagship research programme, Horizon Europe) and raw materials. The risk is that an overly activist interpretation of strategic autonomy could weaken cooperation with like-minded allies in key strategic domains. For American companies dedicated to and invested in the EU, such as GE Aerospace, this could mean exclusion from vital European R&D activities or future commercial and military opportunities. That would weaken their contribution to European competitiveness. Why does this matter?
The issue at stake
As an example, consider my company. GE Aerospace has 45,000 employees globally, approximately one third of whom are based in Europe. The company has been present in Europe for many decades, and through its subsidiaries even longer.
One such subsidiary, Avio Aero in Italy, just celebrated its 110th anniversary and is widely considered a crown jewel of the Italian aviation industry. It has been a reliable partner to many European armed forces, through its participation in the Tornado and Eurofighter programmes. It’s also a main supplier and maintenance provider for the Italian air force and navy.
When it comes to civil aviation and the issue of sustainability, Avio Aero has been a partner in every rendition of the EU’s Clean Sky and Clean Aviation public-private R&D partnerships. It collaborates with EU-origin companies like Airbus to introduce the next generation of aircraft engines, and it actively supports Europe to address the decarbonisation of the aviation sector. At GE Aerospace, we are investing heavily in Europe to introduce technologies like hydrogen fueled engines and hybrid-electric propulsion solutions.
The climate challenge cannot, however, be approached in isolation. It will require close cooperation across the globe, backed by policies and funding that lead to the right levels of investment in R&D and energy infrastructure.
Historically the EU has always been a very attractive region for R&D collaboration. It has a large and highly educated population, and it has excellent research facilities. It has thrived because of its open economy and its strong trade relations across the globe. The notion of strategic autonomy, if implemented in the wrong way, could jeopardise its competitiveness and, ultimately, threaten the goals that the EU is trying to achieve. So, what should be the focus?
It’s fair to say that the biggest game changer for the EU in our professional lives has been building the single market, intended to be a barrier-free zone for trade across member-state borders. Finishing that work is the key to unleashing the full potential of the EU economy. Political intervention will not achieve the intended outcomes. Instead, unleashing the full potential of the European economy will facilitate global competitiveness and support the intended goals of strategic autonomy.
The completion of the single market should therefore be the focus; it will ensure a level playing field within the EU, and an open economy and open trade with other free economies. Strategic autonomy should not be seen as equivalent to autarky or protectionism. Instead, it should be about diversification of supply chains, resilience and cooperation with like-minded allies in support of commonly held objectives.
The Inflation Reduction Act
More recently, the American Inflation Reduction Act (IRA), has provoked the ire of the EU. The Act targets a 40% reduction in US greenhouse gas emissions by 2030. The EU complaint has some justice: that the IRA’s “Buy American” incentives work against free transatlantic trade. Some progress towards a resolution appears to have been made at a recent EU-US meeting.
But the EU complaint misses one important point: unlike many EU policies, that are mostly aimed at taxation and penalising certain behaviour, IRA takes a ‘carrot’ approach to addressing climate change. It provides financial incentives to develop renewable energy and breakthrough decarbonisation technologies.
In comparison, the EU has for example chosen to implement a Sustainable Aviation Fuels (SAF), blending mandate, without offering sufficient incentives. This will clearly increase the cost of flying, impact the flying public and may even prove less efficient in driving the adoption of SAF. Through IRA, the US industry will be incentivised to ramp up production of SAF. Perhaps the most significant impact of the IRA is the economic certainty it introduces. By providing five-to-ten-year horizons for tax credits, the IRA helps bring much welcomed certainty to the large investments that will be needed over the coming decades.
GE Aerospace does not endorse the notion of protectionism and preferential treatment. We believe that free economies should collaborate and partner to create mutually beneficial investment climates that are predictable and ensure fair competition. The EU should focus on completing the single market, remove all remaining obstacles and not consider introducing new protective measures. Instead, it should be working with close allies to overcome common challenges.
The way forward
I understand and appreciate the notion of strategic autonomy. However, if we put too much emphasis on European independence or even autarky, we fail to recognise that on a global level two competing economic systems are being put in place. One is based on democratic values, open trade and the rule of law. The other, on autocracy and coercion. If we want to remain in the lead in key technologies, such as aerospace, we will need to look for close cooperation at an international level between like-minded countries.
We also believe that, next to a strengthened EU, closer transatlantic cooperation and collaboration, especially in R&D, holds significant benefits for all. We believe that more needs to be done on both sides of the Atlantic to revive a collaborative spirit that is based on mutual trust, and that recognises the prosperity that the transatlantic relationship has brought so far. The facts are undeniable. Five million jobs are created by US affiliates in Europe. These US affiliates spend $33 billion per year on R&D in Europe, and they had total capital expenditure of more than $250 billion in 2021. These figures dwarf those from other major economies like China.
A stronger EU and a deepened transatlantic relationship are not mutually exclusive. As a matter of fact, they go hand in hand.
Chris M. Haenen is responsible for executive government relations at GE Aerospace.
More in this series:
- Viewpoint: Standards, not protectionism, will make the EU stronger in technology, MEP argues
- Viewpoint: Are we heading towards scientific self-censorship?
- Viewpoint: For stronger tech, Europe must spend more on defence and research
- Viewpoint: Companies, not governments, should lead global tech collaboration
- Viewpoint: Make sure that openness remains in EU research and development policy