1.2 Basic points

potential benefits in terms of value added alone. The general approach must also include and foster diversification and (operational) risk management. Third, in areas in which diversification by itself proves not to be sufficient, critical competencies need to be specifically established and fostered. Furthermore, an ongoing procedure needs to be put in place at the political level to identify and address emerging strategic risks.

In the opinion of German industry, economic dependencies need to be identified and initial proposals for solutions developed. This statement is only the beginning of this process. It centres mainly on how to establish a more robust economic base (see Versailles declaration of 10 and 11 March 2022) and addresses in detail microelectronics, data, cloud and edge computing, raw materials policy, energy policy, space policy, issues of arms policy, chemical policy, standardisation, and public procurement.

Given the current high momentum in foreign policy, further dossiers in the context of sovereignty will have to be discussed at a later date. Above all, this would include steps to strengthen our defence capabilities and reduce our energy dependency. Special attention also needs to be paid to the production of battery cells on account of its complex role in the value chains across many industries. Many steps have already been taken in the field of trade policy tools.

In all these issues, European institutions need to consult with industry on a much broader basis in order to coordinate resilient strategies, design suitable economic policy packages and, depending on the dossier, encourage consistent action on the part of enterprises, industries, and possibly also economic policymakers at German and European level.

European companies also need to hold a broad debate on the various aspects involved in reducing politically sensitive economic dependencies. The changed security situation means that corporate procurement decisions can no longer be based solely on business management indicators. Increased political risks and supply chain security must be given more consideration within corporate strategic planning. Another aspect that needs to be discussed is the medium-term approach for dealing with global shortages or bottlenecks in critical raw materials and inputs.

1.2 Basic points

The management of strategic dependencies must be based on an analysis of the status quo with a definition of objectives and measures to meet these objectives in every field. This cannot be a one-off stocktake. The critical dependencies of Europe are dynamic and in constant flux with the emergence of new products and production processes. We therefore need an ongoing process of analysis between the Directorates-General of the European Commission and the private sector.

The mission here is not to completely eliminate strategic dependencies but to reduce them at reasonable cost, to manage emerging risks, and to make the structure of value chains more robust by establishing a more differentiated business landscape according to region, industry and company size, and to contain any arising negative external effects.

In the present situation, German industry believes the following topics should be the focus of analysis:

▪ Europe has substantial raw material dependencies not only in energy raw materials but also in critical metals and minerals. Europe’s dependency on many mineral raw materials from China, for example, already outweighs its dependency on Russia for oil and gas. However, in the case of mineral commodities there are no national (strategic) reserves as there are for oil and gas. Global demand until 2050 compared to the year 2010 is forecast to rise by

215 percent for aluminium, 140 percent for copper and nickel, 86 percent for iron, 81 percent for zinc and 46 percent for lead, which means that shortages of these minerals are going to become more severe. As a buyer on the international raw material markets, Europe competes with other global economic powers. Conventional market mechanisms have become less significant in mineral raw materials at the global level over the past few years. It is of crucial

importance that Europe diversifies along the different pillars of securing raw materials.

Excessive raw material dependencies on individual countries will be a luxury we cannot afford. Diversification needs to be strengthened through a holistic and strategic European three-pillar raw materials policy, consisting of: non-discriminatory access to raw materials from abroad (pillar 1); stronger domestic supply, production, and processing of raw materials (pillar 2); the recycling of raw materials (pillar 3). No individual pillar will be able to secure the supply of raw materials for Europe alone.

▪ The EU needs to take a coordinated approach on energy supply. Impending disruptions to the energy supply in one member state will put supply chains at risk of breaking down. While national resilience strategies are to be welcomed, they should not be implemented at the expense of other EU member states. Europe, and particularly Germany, will remain an energy importer in the long term. The future energy infrastructure therefore needs to be based not only on swiftly achieving decarbonisation but also, and essentially, on a strategically planned diversification of suppliers in order to ensure both supply security and keep energy affordable.

▪ There are similar dependencies in certain chemicals. Policymakers and industry must clearly identify which chemicals are difficult to substitute (by using different production methods, for example). Ideally, imports could be procured at short notice from other regions of the world. In individual cases, onshoring will need to be considered. Small and medium-sized companies, in particular, cannot structure their sourcing purely based on the criteria of cost. As the

political risks increase, supply sources must increasingly be selected according to

supply reliability. This trade-off is a management decision which is taken on the basis of the relevant market information, also that of the public sector.

▪ Europe is still the biggest global player in matters of standardisation. It is important that Europe strengthens this role. Standardisation processes need to be accelerated in areas that are of particular relevance. A broad debate is needed within Europe to identify which areas these are, including emerging technologies in the fields of transport, energy (hydrogen in particular), artificial intelligence, microelectronics, cybersecurity, battery technologies and the circular economy. In future, standards will not be based on technical criteria alone. Standards can

only be established successfully if they are based on market relevance and practicality, and if the parties involved are included in the process of defining these standards,

thereby legitimising them. Standards developed along these basic principles are applied by the businesses involved on a voluntary basis and can therefore unfold their full benefits in practice.

▪ Setting standards for our own market will not be sufficient. Whether Europe remains capable of exporting in the long term will also depend on preserving access to global sales markets in third countries. Standards must therefore form a central element of EU trade strategies and agreements. In negotiations on market access between the EU and third countries,

European and international standards need to form a standard part of public tenders.

This applies particularly to the implementation of the Global Gateway.