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Thank you so much for inviting me to be with you today. This is much more than just a beautiful venue. It is above all the home of talented students and professors.
It makes a lot of sense to be here this time of year. Yesterday marks 103 years since the end of World War I. This city, this university, this very building, were first line witnesses to the horrors of the war. The medieval university library, like so much else of the city’s patrimony, was burned to the ground.
Leuven also witnessed how Europe built back after a tragedy, and did so with a helping hand from across the Atlantic. It is well known to all of you here how the National Committee of the United States for the Restoration of the University of Louvain collected donations from around America to rebuild the library and its collection, with the wonderful design from architect Whitney Warren.
This gesture of transatlantic solidarity speaks to the deep ties that bind us together: a common history, shared values and experiences; as well as an enduring believe that the future can always be made better.
Today, as we emerge from the pandemic, we are also at a moment of renewal. We renew our economies, making them fit for the green and digital transitions. And we renew our transatlantic relationship – after four years where, let’s be honest, they were not in their best shape.
And what a year of renewal 2021 has been! The EU and the United States held their first formal summit since 2014. We have settled long-standing disputes over aircraft subsidies and steel and aluminum. We have launched joint initiatives on climate and on health. And last September, I had the honour to co-chair the first-ever EU-U.S. Trade and Technology Council in Pittsburgh. Only two days ago, President von der Leyen met again with President Biden in Washington D.C., to take our common agenda forward.
This deepening of transatlantic cooperation comes at the right time. The world is changing, with rival systems of governance emerging. The EU and the U.S. can shape the rules of the road for the 21st century economy, based on our common values: democracy, open and competitive markets, free choice, and equal opportunities.
But achieving this won’t be easy. We will face tensions and obstacles on our way. For instance, at the height of the pandemic, European vaccine manufacturers were not able to source their components from the United States, creating shortfalls in production when it was most needed.
This brings me to my main theme today: the importance of trustworthy transatlantic supply chains for our economies and for our partnership.
The European Union has benefitted enormously from open trade. One in seven European jobs depends on exports. Transatlantic trade alone directly supports 8 million jobs. Our openness is, and will remain, an asset for our Union.
At the same time, the pandemic has taught us how our dependencies in strategic sectors can become a weakness, especially in times of crisis. Shocks to the market, or even just political decisions taken outside our borders, can disrupt the supply of essential products when they are most needed. This is why the Commission set out to identify areas of strength and vulnerability.
Last May, we presented an analysis of over five thousand products. Out of these, we found 137 where the EU to has strategic dependencies from third countries, notably on the raw materials, chemicals and pharmaceutical ingredients. From these, we identified 34 products where the market cannot be expected to solve dependencies on its own through diversification. This is where we need to focus our action.
The United States also did a supply chain review, announcing in June a range of initiatives to boost domestic capacities. And the areas they focused on largely overlapped with those identified by the European Commission.
This begs the question: as both sides set out to boost our industrial bases, how do we turn our interdependencies into a source of strength, rather than friction?
How do we safeguard economic security for our respective markets, without losing the benefits of the largest trade and investment relationship in the world?
As we think about future crises or a changing political landscape, how can we create the trust needed to rely on each other?
All of these questions come at the forefront as we look at the field of semiconductors. These miniature components that power every device we rely on in our lives, and for which there is now a serious shortage. Whether you are in the market for a PlayStation 5 or a new car, whether you know it or not, you need semiconductors. And for businesses that depend on them, the shortage can destroy profits and undermine their place in the recovery.
There are many factors behind this shortage: From the increase in demand coming from home-stay during the pandemic; to the geopolitical tensions leading to hoarding of supplies, notably in China; to the business decisions of some companies to cancel supply contracts, only to find themselves at the back of the queue when demand picked up.
In this context, both the EU and the United States have set targets to expand innovative capacities in design and manufacture of semiconductors. On our side, the European Chips Act will increase transparency and ensure better coordination in the supply chain.
One thing we know for sure: new investments will not solve the immediate shortage, given the time it takes to increase capacities. That means we must use lessons learned and have a long-term perspective when deciding on investments.
Europe has important strengths to bring to the table. We lead on manufacturing equipment and we are at the forefront of research and innovation. This is thanks in no small part to this city, and the contribution IMEC makes as a world-class centre.
Still, we need to leverage our strengths, by investing in them. A good example are the Important Projects of Common European Interest in the area of semiconductors, which bring companies and Member States together to address challenges that are too big to solve alone, but in a way that safeguards our strong Single Market. With a second IPCEI now in the pipeline, we will be able to stay at the cutting-edge of innovation. And that can be innovation on the scale of chips but also on other parameters, such as their energy efficiency, to allow us to meet the challenges of the green transition.
Because investing in innovation is key, if we want to stay competitive and increase our production of semiconductors. Much of the attention has focused on leading-edge semiconductors. And I do believe it makes sense for Europe to aim to produce some of the world’s most advanced chips, down to 2 nanometer nodes. But that’s not our only focus. European industry needs reliable access to a wide spectrum of chips, to meet today’s demand, and in order to power tomorrow’s revolution in connected cars and devices. And we need energy efficient semiconductors. Lowering energy-intensity remains key to success.
For all this to work, we need access to global markets. And we need to know how to manage our interdependencies with other parts of the world, including the United States.
I see four main principles behind strong partnerships for resilient supply chains:
The first step towards cooperation is transparency.
Government should only take action on the basis of complete information. Within the EU, the semiconductor alliance we have launched brings together all stakeholders to create this transparency. At the first meeting of the Trade and Technology Council, we agreed with the United States to share the outcomes of our assessments, in order to jointly identify gaps and vulnerabilities in the supply chain.
Second, keep markets open!
Self-sufficiency is an illusion. When you think about the scale of what is needed, it becomes clear that no country and no company can do it alone.
350 to 420 billion dollars. That’s how much the U.S. semiconductor industry estimates is needed in upfront investment, to cover all domestic demand through a fully self-sufficient supply chain. For the EU, this figure would be between 240 to 330 billion. That kind of money would of course mean one thing: more expensive chips and a negative impact on all kinds of markets.
But as the pandemic taught us, fully segmenting markets, with each region specialising in just one part of the supply chain or one type of semiconductors, is not the right answer either.
We need to find the right balance. Our aim should be diversification among like-minded partners, to build resilient supply chains we can rely on, and avoiding single points of failure.
Third, we need to avoid a subsidy race that leaves everyone worse off.
In the current circumstances, it becomes tempting for companies to try to play out governments against each other, scanning the landscape to see who would be willing to pay more. This risks letting taxpayers – whether European or American – pick up the bill, and get little from it.
EU State aid control is crucial to ensure a level playing field in the Single Market. State aid may be justified, only if it is necessary to get a project off the ground, and provided that competition distortions are minimised and that benefits are shared widely and without discrimination across the European economy.
This is also why the European Chips Act will provide a coordinated EU approach. And it’s why strong cooperation with our trusted partners, including the United States, will make a big difference.
Fourth, to build such trust, we need sufficient guarantees of security of supply.
Restrictions imposed during the COVID crisis were not always proportionate. They showed the need for better coordination.
We need to give industry a stable and predictable environment so they can make long term business decisions, based on trust.
We need the reassurance that we can continue to rely on our partners even in times of crisis – even if the political landscape changes in their governments.
The key question is: how?
These are my initial reflections. And they don’t just apply to the transatlantic relationship or to semiconductors. They apply across the board:
First, we need to keep order in our own house. The pandemic showed us that even within the Union’s internal borders, the risk of restrictions is still present when crisis strikes. This is why next year we will propose a Single Market Emergency Instrument, with the aim of avoiding fractures in the Single Market, when a future crisis happens.
Internationally, the same logic applies. We need to start thinking about how to develop an international supply chain emergency instrument.
It would consist of a commitment between like-minded partners to keep supply chains open to each other, to the maximum extent possible, in times of crisis. For such a commitment to be meaningful, it needs a strong, factual basis:
Better visibility of potential shocks, by stress testing supply chains and sharing information on a timely basis.
Effective early warning mechanisms, to avoid surprises when difficulties arise.
In addition, we need to cooperate towards compatible long-term strategies for investment, in order to achieve the principles of supply chain resilience that I have just mentioned.
And we need coordinated export controls, to help protect security, while ensuring prior consultation and managing unintended consequences.
If we are able to develop these tools, together with our partners, we will be one step closer to the resilient supply chains our economies need for their green and digital future.
The next Technology and Trade Council meeting will take place in the spring. Now that we have things up and running, this will be the test of how far we can take the approach forward. I think that if it is based on trust and our common values, we can go quite far indeed.
We must also advance the discussion with other like-minded partners. The supply chain resilience summit that President Biden chaired in Rome on 31st October was a good start. This work must go on – building consensus, building trust, building more common ground. We must use the opportunities we have ahead us to make durable progress, and find agreements that will outlast the crises of tomorrow.
Because the story of the Library is also a warning to avoid complacency. Just twelve years after the Library was rebuilt, it was destroyed a second time, as Europe once again fell into the darkness of war, more deadly and horrible than the first.
The lesson we took from that is something that defines the European Union, even to this very day. It can be summed up in a phrase:
It is twice as hard to fight for peace and prosperity as it is to fight a war.
But it is worth so much more to do so.
Thank you.