EU trade limits put shackles on itself

SEMI Europe, the European arm of an industry association serving the global electronics design and manufacturing supply chain, has published a position paper in response to the European Commission’s solicitation of industry feedback on the five initiatives it proposed on Jan 24 to advance the implementation of the European Economic Security Strategy.

It exposes how EU enterprises have a different understanding of and approach to economic security from the bloc’s politicians.

The Priorities on the European Economic Security Strategy, published by SEMI Europe on Monday, says that “a comprehensive approach to economic security must build on a comprehensive industrial strategy that prioritizes competitiveness and technological leadership to achieve long-term growth”.

While recognizing the need for economic security, it says that requires a positive approach based on support and incentives at the European level and international cooperation, rather than restrictions, controls and screens.

Although the European Economic Security Strategy aims to establish a common framework for achieving economic security by promoting the EU’s economic base and competitiveness, by protecting against risks and partnering with the broadest possible range of like-minded countries to address shared concerns and interests, it has, in effect, only strengthened the restrictive side that will unavoidably bind the hands and feet of not only EU enterprises but also their international partners. By doing that, it is actually putting the EU’s economic security at risk by making its enterprises less competitive in the world.

SEMI Europe represents companies from across the European chip industry including ASML, Infineon and STMicroelectronics, as well as leading European research laboratories such as Imec, Fraunhofer and CEA-Leti. Its position paper indicates how divorced the EU policymakers are from the reality of the industry, and the fact that their view of security still relies on a castle-and-moat protectionist approach.

However, as SEMI Europe reminds them, the supply chains of high-tech industries, with those of the semiconductor sector being a prime example, are extremely specialized, fragmented and globalized. Tens of thousands of entities distributed around the world comprise the design, manufacturing, testing, packaging and distribution links in the semiconductor chain.

Likewise, unrestricted foreign direct investment and exchanges of talents, technology and data have always been and will continue to be a critical aspect of the business operation of the vast majority of the enterprises in the industry.

As such, the restrictive measures the European Commission has stipulated on outbound and inbound investment, export controls and supply chain reporting obligations, among other things, as part of its economic security strategy, will constitute major interference in the business decisions of companies and impose an unnecessary burden on them, ultimately weakening their competitiveness and damaging the EU’s business environment. That is against the objective of the European Chips Act, which was introduced to prevent the EU from losing chip companies to the United States.

The feedback from SEMI Europe reflects a common voice of those, within and outside the EU, that will be affected by the bloc’s economic security strategy. It should prompt EU policymakers to think twice before putting shackles on the bloc that are actually designed, forged and hammered by some armchair strategists in Washington. They wrongly believe the US can maintain the prosperity and economic leadership it has achieved through free trade by killing trade. Do the EU policymakers really think the same?

SEMI Europe holds that economic security is best achieved by strengthening international partnerships and mutual independence within the global supply chains. That is a more positive approach.