Calibrating the EU’s Trade Dependency

Abstract

As the energy crisis triggered by the Russian war against Ukraine vividly demonstrates, the EU suffers from inconvenient external dependencies. The trade dependence on China, the European Union’s main source of imports, could be an acute source of strategic vulnerability for the EU economy. Given the evident risks in maintaining close economic relations with authoritarian regimes, a policy change is needed to address the EU’s trade dependence, aimed not only at shifting economic incentives for businesses but also at reconciling sustainability goals with geopolitical priorities.