einforcing the structure of the euro area but weaknesses remain. The next German government should develop a proactive strategy to reduce these by, for example, completing the banking union and deepening and integrating capital markets while increasing the supply of safe assets. It is also in Germany's interest to further strengthen the EU's internal market.
- Managing technological and geopolitical confrontation
Technology policy has become one of the central fields of action in foreign economic policy, because of the central role those digital technologies play for all economic sectors, and because competitors can exploit digital interdependencies for their geopolitical goals. The EU has focused more on this in recent years but does not have all the necessary instruments to respond effectively. While it can enforce standards through regulation, the EU lacks financial instruments to promote new technologies. Decisions on foreign investment in European companies that produce key technologies also remain largely at the member-state level.
A fundamental problem is the lack of investment in new technologies, networks and human capital. In AI, for example, there are far too few graduates in the EU. A training push, the strengthening of the digital single market, more investment and the improvement of venture capital funding are indispensable prerequisites to ensure Europe does not fall further behind in digital technology. This, in turn, is of central importance to better manage interdependencies and thus be less vulnerable.
When making decisions about the use of technologies, Europe's resilience must be taken into account. Overall, a defensive strategy will not be enough. Europe must invest more in digital technologies, not only to better manage geostrategic dependencies, but above all to be future-proof in these key technologies. In recent years, Germany has rightly started to invest more in digital technologies. However, current investments remain insufficient and should be stepped up.
- Not limiting climate policy to Germany and the EU alone
In the area of climate policy, two priority areas are relevant to foreign economic policy. First, the European Green Deal has direct and indirect effects on global trading partners. Second, it must be a goal of German and European policy to accelerate decarbonisation worldwide.
The European Green Deal has direct consequences for trade. The goals of full decarbonisation by 2050 and significant emissions reductions by 2030 mean the EU will import less fossil fuel. Energy suppliers in the European neighbourhood will be affected with direct impacts on their economic models and implications for political stability. Managing this political change will be a major challenge.
The energy transition also means the EU will need significant raw material imports for green technologies. Supply chains must be resilient to avoid new dependencies on raw material suppliers. Finally, falling demand for fossil fuels – of which the EU is one of the largest importers – will have a global impact in that, in principle, the price will fall. European foreign policy cannot ignore the Green Deal; on the contrary, it will have to manage its global impact. Europe needs a programme of aid and technical assistance to manage the transformation of economic systems to promote the development of green-energy production in the neighbourhood. Green hydrogen, for example, could become a new export commodity for countries suffering losses in fossil-fuel exports to Europe.
Meanwhile, global emissions continue to rise. The EU now contributes only about 8% of global emissions, far less than China (26%) and the US (13%). The European Green Deal alone can only make a small contribution to combating climate change. An agreement with the US on a carbon tariff or border adjustment mechanism would provide China with an incentive to step up its climate efforts, and could also spill over to other countries.
Technology cooperation with third countries, especially poor third countries, could help globalise the green deal by reducing the