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The New Vision for Europe: How Competitiveness, Trade, and Security Will Impact EU Commission Planning

By Luke Salter, EU Policy Researcher, Alice Grignani, EU Policy Researcher, Emanuele de Francesco, EU Policy Analyst, Minoas Vitalis, EU Policy Specialist, and Anita Zagulska, Senior EU Policy Specialist

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International affairs is undergoing a major transformation, with geopolitical competition increasingly becoming the norm. This shift is driving change in the European Union. At the beginning of her first term as Commission President, Ursula von der Leyen declared that she planned to make hers the most geopolitical Commission ever. Going into her second term, this ambition for the EU to take on an increasingly geopolitical role has only grown. 

The EU’s plans for competitiveness, trade, and security will be key in the context of an increasingly geopolitical Commission. Consequently, FiscalNote EU Issue Tracker has put together this overview of these domains and the developments we are likely to see over the coming years. 

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Competitiveness

In the EU context, “competitiveness” reflects the capacity of its economies to sustain growth, innovation, and high living standards, while addressing the evolving demands of a rapidly changing global environment. It encompasses economic performance, technological advancement, environmental sustainability, and social inclusion, with a focus on maintaining the Union’s position in global markets.

The European Commission's Political Guidelines for 2024-2029, along with the Letta and Draghi Reports, emphasize a renewed focus on competitiveness driven by sustainability and digital transformation. The guidelines highlight the importance of the green transition and advocate for a climate-neutral Europe by 2050. Achieving this goal necessitates integrating environmental sustainability into economic strategies, ensuring that competitiveness aligns with decarbonization and the circular economy.

The Letta and Draghi Reports underline the need for Europe to enhance its innovation ecosystem and reduce dependency on external actors, particularly in critical technologies and supply chains. They advocate for a more resilient and autonomous EU and highlight the importance of investing in research and development and digitalising industries and infrastructure. 

This evolving definition of competitiveness also includes strengthening social cohesion, ensuring that economic progress benefits all EU citizens. The EU’s competitiveness, therefore, hinges on a balance between economic growth, sustainability, resilience, and inclusivity, setting a course for long-term prosperity.

Areas of Focus

Given recent geopolitical developments and changes in the global political context, the EU will focus on several areas and trends that will strengthen its competitiveness:

To alleviate businesses' burdens, the EU will strive to present various initiatives, such as the Competitiveness Compass, and focus on improving the Single Market in areas of concern to allow businesses to flourish. Moreover, the EU will aim to reduce reporting requirements and simplify the law to eliminate contradictions or overlaps. 

In order to enhance competitiveness, the EU will also have to work towards the goals of the European Green Deal. Some of the expected developments and actions that the Commission will take, aside from presenting the Clean Industrial Deal, will be establishing the emission-reduction targets for 2040, launching the Industrial Decarbonisation Accelerator Act, reducing energy costs for citizens and businesses, increasing the investment in clean energy, and securing supply of critical raw materials, clean energy, and clean tech. 

resilient and circular economy is considered a cornerstone of EU competitiveness, so the Commission will focus a lot of its efforts on this area. Consequently, it is expected that the Commission will introduce a chemicals industry package on “forever chemicals” (PFAS) and work on the completion of the European Health Union, especially through diversifying the supply chain, enabling access to treatments, and ensuring a more resilient health sector. To that end, the Commission will also likely focus on presenting the Critical Medicines Act and investing in preventive healthcare. 

Pursuing its aim of boosting productivity and technology, the Commission will focus on improving connectivity, working on EU digital laws, and tackling challenges posed by e-commerce platforms. Furthermore, the Commission is expected to strive to invest in supercomputing, semiconductors, the Internet of Things, genomics, quantum computing, and space technology. AI will also be one of the key themes the Commission works on. 

In order to build upon productivity and tech, the increased investment in research and innovation (R&I) will be visible. To that end, the Commission will likely point out the need for further spending and investment in R&I in its upcoming mid-term evaluation of the Horizon framework. 

To tackle the issue of skills and labour gaps, the Commission will focus on closing the gaps in the job market by establishing a Union of Skills, improving basic skills, proposing a STEM Education Strategic Plan, promoting vocational education and training (VET), and ensuring that the EU attracts skilled workers.

Anticipated Legislation 

The Commission is expected to present several new pieces of legislation to pursue its goals of Competitiveness. 

During a presentation of her new College in the European Parliament, Commission President Ursula von der Leyen announced that the first initiative of the new mandate would be a Competitiveness Compass. The Compass focuses on: bridging the innovation gap with the U.S. and China, implementing a joint plan for decarbonisation and competitiveness, and fostering security while reducing dependencies.

Released alongside the Competitiveness Compass, the Commission’s Annual Single Market and Competitiveness Report for 2025 addresses the EU's global competitive position. In line with Mario Draghi's report, the report focuses on productivity, innovation, and security.

The Omnibus Simplification package is scheduled to be presented on February 26. It is expected to impact, at minimum, the implementation of the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), the Taxonomy Regulation, and the Carbon Border Adjustment Mechanism (CBAM). The package aims to streamline the existing reporting legislative framework to enhance the competitiveness of European companies.

The Commission is provisionally expected to publish a Communication outlining a horizontal Single Market Strategy by the end of June 2025. This Communication is set to propose a strategy focused on ensuring the full implementation of existing rules and the swift removal of barriers. It also aims to strengthen the cross-border provision of services and the movement of goods, including essential goods.

The Clean Industrial Deal (CID), which is anticipated to be presented by the end of February, is expected to follow up on the European Green Deal. It will continue the transition to a sustainable economy, focusing on strengthening industry and increasing competitiveness. The CID aims to support companies in reaching a 90 percent emission-reduction target for 2040. This would be achieved by providing access to cheap and sustainable energy supplies and raw materials.

The Revision of the Public Procurement Directive, envisioned for late 2025 at the earliest, would focus on reviewing the original Directive 2014/24/EU by ensuring that public procurement would contribute to developing innovative and green goods, simplifying public procurement rules, and ensuring that European products are granted preference in certain strategic sectors. 

Expected to be presented in early 2025, the EU will use the future European Competitiveness Fund to invest in Important Projects of Common Interest (IPCEIs), leveraging the EU's collective strength to invest in common projects. 

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Trade

Trade in the EU encompasses several fields: negotiation of bilateral trade and investment agreements, trade defence measures, dispute settlement in the WTO and MPIA, and customs. 

Trade is an area in which the EU has exclusive competence, meaning the EU alone has the capacity to legislate binding acts. This makes it particularly relevant in an era where the EU intends to take on an increasing role as a geopolitical actor as it means that trade is one of the strongest geopolitical tools in the EU’s arsenal. 

The EU has continued to increase its ability to carry out trade legislation with relative autonomy from the Member States, increasingly shifting to split rather than mixed trade agreements. A split agreement does not contain clauses that fall outside the EU's areas of exclusive competence. Consequently, it can enter full force without ratification by the Member States following its adoption in the Council and assent in the Parliament. 

EU actions regarding trade over the next Commission will be characterised predominantly by three types of legislation or procedure: bilateral trade agreements, trade defence measures (normally taking the form of an implemented or delegating act) and dispute settlement, predominantly in the WTO but also in the MPIA. 

Trade defence measures will remain reactive. Their volume is likely to grow as increasing protectionism on the part of the U.S. leads to major exporters (predominantly China) looking for new markets to “soak up” surplus exports.

Dispute settlements are expected to be among the most prevalent measures taken by the EU and will be pursued in reaction to disputes as they arise. Due to President Trump’s more protectionist policies, more disputes are expected to arise with the U.S. than during the Biden presidency. In addition, the EU is expected to continue to use the tools at its disposal to push countries towards membership of the MPIA in the absence of a functioning Appellate Body in the WTO. 

Regarding bilateral trade agreements, the EU can be expected to prioritise markets that will help replace China as a trading partner and strengthen the EU’s supply chains. This means that the EU-Mercosur Agreement will continue to be important as the EU seeks to obtain its ratification, while the EU-India and EU-Indonesia trade negotiations will likely be priorities for the Commission moving forward. 

The EU also aims to build on the previous liberalisation of trade with Moldova and Ukraine. While in the past these liberalisations have been one way, intended to support their economies in the aftermath of the full-scale invasion of Ukraine in 2022, the goal is now to expand them into bilateral liberalisations which will benefit both parties. 

The EU will remain committed to reform within the WTO. Its non-functioning has hampered the resolution of disputes and enabled countries to more freely pursue protectionist policies. Consequently, the EU has identified a reformed WTO as critical to the maintenance of the rules-based trading order. 

Another important piece of legislation the EU will continue to work on during the new Commission is the proposal to reform the Customs Union. This aims to overhaul and modernise the EU’s approach to customs, particularly regarding e-commerce. Key to this will be the creation of an EU Customs Data Hub and a new EU Customs Authority. The Commission currently plans for companies to be given access to the Customs Data Hub from 2028, with it becoming mandatory in 2038. 

Relationships with China & the US

Two relationships — with China and the United States — will continue to shape EU trade policy during the coming Commission. 

The EU’s trading relationship with the United States has always been complicated. Although they are generally aligned geopolitically, they are often opposed on many trade matters. Under the new U.S. President Trump, their relationship will likely diverge geopolitically, becoming more transactional in nature. Their disagreements on trade will only grow as Trump implements a more protectionist trade policy in the United States. 

The relationship with China is likewise complicated. The EU and China both remain committed to the current trade status quo, although it is one in which they frequently have disagreements (often motivated by perceived protectionism on the part of one party). However, they are also increasingly adversaries geopolitically, with a key project on the part of the EU being continued efforts to “derisk” its global supply chains. In functional terms, this means becoming less dependent on China for key raw materials and manufactured goods. The EU can be expected to take further steps to screen and control investment into critical sectors in the EU economy and a continued effort to build trading relationships that allow the EU to diversify its supply chains. 

Promoting European Interests

The EU is expected to continue using trade as a geopolitical tool to promote European values. Clauses in trade agreements that link their application to upholding EU values are likely to become more common, such as the clause in the Mercosur Agreement that makes its application contingent on members upholding the Paris Agreement. 

The EU has also stated its aim to pursue a trade policy that supports its digital transition. It aims to do so primarily by promoting innovation and continuing to implement new digital standards and regulatory approaches, particularly regarding data protection. The EU has also highlighted a desire to introduce rules on digital trade through the WTO and facilitate cross-border data flows. 

The EU will seek to use trade to promote stability and prosperity in its neighbours and in Africa, outcomes which will hopefully mitigate problems in other areas such as migration. It has also expressed an interest in diversifying supply chains to derisk from China. Therefore, the EU’s trade partnerships with its neighbours and African states can be expected to expand and deepen over the coming years. 

Security and Defence

Since the establishment of the EU, the concept of security has often been mentioned in the Community’s political discourse, adapting its meaning in response to the various crises it has faced over the years.

Security within the EU has been increasingly and predominantly associated with Defence. 

Although competence on matters of security and defence largely falls under the responsibility of individual Member States, the EU maintains the crucial role of defining the Union's political priorities. In this context, defence was identified as a key priority in the political agenda for the upcoming five years, as clearly indicated in President von der Leyen’s Political Guidelines, where the topic has been linked to most of the new Commission’s priorities.

Reflecting this change in direction, the EU has already undergone significant institutional changes in the new term: the appointment of a standalone Commissioner for Defence and Space and the change of status of the Committee on Security and Defence (SEDE) from a Subcommittee of the Committee on Foreign Affairs (AFET) to a full-fledged Committee.

Priorities for the Next Five Years

In the next five years, the Commission will prioritise the creation of a European Defence Union to enhance readiness and preparedness. It is in line with the Niinistö Report, which stressed the necessity of introducing and implementing a comprehensive security approach that integrates both civilian and military capabilities, as well as the importance of collaboration among EU member states, resilience-building, and adapting to evolving security challenges. The EU will work toward enhancing the European defence industry, promoting cooperative investments, fostering collaboration among Member States and with third countries, and boosting preparedness.  

One key step in strengthening the EU Defence Industry is rearmament, which will entail bolstering the European Defence Fund (EDF) through substantial investment in high-end defence capabilities in critical areas and reinforcing the European Defence Industry Programme (EDIP) to foster joint procurement and address the most urgent deficiencies.

The EU will also prioritize the implementation of specific strategies and frameworks (such as the European Defence Industry Strategy (EDIS), European Defence Industrial Development Programme (EDIRPA), and Act in Support of Ammunition Production (ASAP)) and the consolidation of cyber-defence capabilities. 

To facilitate cooperative investments, the emphasis will be on delivering a series of measures designed to establish a Single Market for Defence products and services, to further boost production capacity and encourage joint procurement.

In parallel, the EU will focus on fostering cooperation, both among Member States, and with third countries. In particular, the next five years will be characterised by a closer collaboration with NATO, especially with a view to putting forward and developing a number of Defence Projects of Common European Interest. Additionally, the EU renewed its commitment to the security of Ukraine.

Lastly, the EU will undertake a horizontal approach to boost preparedness at the Union level, focusing on increasing military mobility, addressing vulnerabilities to cyberattacks and hybrid attacks, and implementing the Space Strategy for Security and Defence.

Upcoming Key Initiatives

Although the concrete actions necessary to address these priorities will be outlined in the forthcoming Commission's Work Programme, several key initiatives have already been identified. The anticipated measures to be introduced soon include: a White Paper on the Future of European Defence, a Preparedness Union Strategy, and EU Space Law.

Touching upon the previously mentioned overarching trends, the White Paper on the Future of European Defence will examine issues surrounding capability, competitiveness, and investment challenges. It will lay out a road map for achieving key objectives, including establishing a European Air Shield, improving defence spending, and reducing external dependencies for defence procurement. 

Complementing the White Paper, the envisaged Preparedness Union Strategy will address the need to bolster crisis and security preparedness through improved cyber defence capabilities, integrated deterrence, and more strategic approaches to sanctions.

Lastly, the EU Space Law will strive to minimise collisions between space objects, boost the robustness of space-based services, and implement guidelines for space safety, sustainability, and security. The expected measure will encompass broader objectives such as boosting the competitiveness of the EU space and defence industry through heightened cyber protection and addressing the fragmentation of the single market.

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