As China and the United States are increasingly using their economic power as a geopolitical weapon, Europe is vulnerable. In policy debates, the global innovation race is often front of mind – and with good reason. A major effort is required to develop a truly effective industrial policy with sufficient direction and scale. But unless simultaneously a solution is found for the growing trade imbalances, we risk spending vast amounts of public money, and jeopardising key European values and aspirations in areas such as privacy, working conditions and climate policy – without actually reducing our critical dependencies.
To face this situation, we must be willing to think outside existing frameworks and consider policy instruments we have so far been reluctant to deploy. In the report ‘Europe in the Era of Geoeconomics: Rebalancing Trade, Boosting Innovation’ the WRR advocates for an integrated response to both challenges, addressing trade imbalances as well as investing in a strong innovation system. The report discusses various possible pathways and the key considerations involved.