Europe’s economic security agenda needs far better techno-industrial intelligence

Building a solid analytical and intelligence base for technological and economic security would ensure Europe isn’t just reacting but actively shaping the future of the global technology landscape, say Rebecca Arcesati and Tobias Gehrke.

Days after former Italian Prime Minister Mario Draghi delivered his much-awaited plan to safeguard European industries from US and Chinese competition, a reality check came from Sweden. Northvolt, the state-funded battery manufacturer many in Europe had hoped would cut dependencies on China’s clean tech, is mired in crisis due to major production issues. According to some media reports, part of the problem was that the company had relied on defective Chinese equipment. Sweden had already suffered from Chinese export restrictions on graphite, a vital battery material.  

Tackling such vulnerabilities in Europe’s techno-industrial base is on everyone’s mind – but getting to the bottom of what governments can and should do is hard. Europe needs robust insights into its most important industrial clusters and how powers like China can exploit supply chains. Building the necessary analytical base requires considerable resources and is tricky to coordinate among 27 governments. Partnerships that offer sticks and carrots for coordination among government, firms, and experts, a dedicated EU analysis and monitoring center for technology supply chains, and a multi-speed Europe approach in which some member states commit to deeper cooperation beyond the EU-27 could be the answer.  

Private sector and intergovernmental coordination hinder EU tech risk assessments

EU governments are realizing that an effective economic security agenda relies on understanding the dynamics of innovation, production and trade in critical and emerging technologies. Without this knowledge, governments are flying without radar when designing policies to protect and promote assets sensitive to security or competitiveness. But this knowledge does not come easily, for much of that techno-industrial intelligence lies in the private sector, which is protective of its trade secrets, and in some cases research organizations whose insights are not channeled into policy processes. 

Efforts are underway to change this. The European Commission has conducted a risk assessment of four key technology areas. It also surveys European chipmakers over their China exposure, and monitors several priority supply chains. And some members are independently mapping their strategic supply chains.  

These efforts are positive. But they have also uncovered serious challenges that hinder policymakers from gathering, sharing and making sense of techno-industrial intelligence. Conversations with informed individuals from both the public and private sectors pointed to three key limitations: (1) limited industry and expert involvement; (2) insufficient geopolitical analysis of supply chain risks; (3) a lack of trust and coordination among member states. 

First, businesses are often reluctant to share data and insights into their transactions and vulnerabilities, fearing government restrictions or – particularly when information channels are not secure – handing their competitors an advantage. Building secure structures for information sharing on global market trends, technological developments and supply chain risks is therefore vital.  

Second, even when such insights are available, linking this data to geopolitical intelligence, such as China’s state-directed technology policies and their potential for causing harm, is crucial. Only by doing so can governments hope to create actionable insights, like early warnings to safeguard technological advantages.  

Third, pooling expertise and insights across the EU remains a big challenge, mostly of trust, given that member states are also economic competitors. Capitals are also diverging on their threat perception around technology supply chains, largely depending on whether their national industries have stakes in the game.

Public-private partnerships for Europe’s techno-economic security need carrots and sticks 

To address these gaps, the Commission and member states must lift the risk assessments to the next level. A new approach should be based on strong coordination with the private sector, secure information-sharing protocols and legal obligations for companies to report potential risks.  

First, the EU could set up Critical Tech Councils for each technology, which would include representatives from the Commission, member states, and company executives. These councils would serve as standing platforms for information exchange on security risks, supply chain disruptions and strategic challenges where companies provide detailed assessments of their supply chains, including foreign dependencies. Confidentiality agreements and secure communication channels must be in place to incentivize industry to share sensitive information. 

In line with what others have recommended, member states could consider mandatory reporting for private companies in critical sectors, such as information about their foreign suppliers and exposure, to assess potential national security risks. Taking a page from Japan’s economic security legislation, those companies subjected to such disclosures should receive financial assistance.  

Second, the format could be extended to include external experts – scientists, engineers, and geopolitical analysts – as well as the intelligence community. These diverse views are necessary to gain deeper insight into China’s technological capacity and strategies and how geopolitical dynamics overlap with technical data. Members of the Five Eyes intelligence alliance and some EU governments already brief companies and universities on issues like cyberattacks and foreign interference. But at EU level, civilian intelligence sharing remains weak.  

A multi-speed Europe approach could help build a more agile analytical backbone  

The second point above is especially key because much expertise on China’s innovation system, technological capacity, and techno-industrial policy, including their precise geopolitical impacts, exists outside the intelligence community – often outside government entirely.  

A dedicated EU analysis and monitoring center that produces and compiles information, and that channels actionable insights into policymaking, would help. This need not be created from scratch. The Commission’s Observatory of Critical Technologies, which is housed within its Joint Research Center, is already a good resource. The EU’s intention to scale up the Observatory to better monitor and mitigate critical dependencies along technology supply and value chains is encouraging. It could even be expanded to house the Critical Tech Councils. 

The challenge will be twofold: Ensuring adequate funding for this analytical backbone and turning intelligence – both open source and classified – into action. One solution could be for member states with significant stakes in each technology field to form alliances of the willing. In such plurilateral, technology-specific alliances, they could commit to deeper analysis and information sharing beyond the EU27.   

Such a differentiated integration could help bypass coordination challenges. It could also facilitate the kind of secure information sharing with industry and technical experts described above. Finally, it could help member states share best practices and coordinate responses to challenges such as supply chain disruptions and undesirable technology leakage. In the future, the ambition should still be to include all member states.  

Building a solid analytical and intelligence base for technological and economic security would ensure Europe isn’t just reacting but actively shaping the future of the global technology landscape. Absent this information backbone, Northvolt’s case will hardly be the last.

About the authors:

Rebecca Arcesati is a Lead Analyst at MERICS. Her research focuses on China’s technology and digital policy as well as Europe-China innovation relations.

Tobias Gehrke is a Senior Policy Fellow at the European Council on Foreign Relations where he covers geoeconomics, economic security, and great power competition in the global economy.