Europe’s economic strategy is being reassessed in a period of profound geopolitical, technological, and industrial change. Questions that once appeared technical are now central to Europe’s future: how to strengthen European capabilities, boost local innovation, reduce critical dependencies, enhance security and resilience, and ensure that public policy supports sustainable economic growth.
These are legitimate and urgent questions. They deserve a serious and constructive debate. While acknowledging the need for Europe to change, and change quickly, policy makers also need to honestly face up to the costs, risks, and trade-offs involved.
CERRE’s recent work on the role of ‘European preference’ in Europe’s economic strategy is intended as a contribution to that debate. It does not reject European preference as a policy tool. Rather, it discusses when such measures may be most effective, where they may carry risks, and how policy makers can design them in a way that best delivers Europe’s broader strategic objectives.
At the same time, the effectiveness of policy depends on design. European preference can deliver meaningful benefits, but it is not automatically beneficial in every context. Its impact depends on the sector, the policy objective, the market structure, and the way the measure is implemented. Proponents of a European preference are wrong to see discussion of how good design can minimise costs and risks as ideological. On the contrary, it is an essential part of an evidence-based approach.
In some cases, preferential measures may help strengthen European capabilities, support domestic investment, reduce strategic vulnerabilities, or enable emerging European suppliers to reach the scale needed to compete more effectively. In other cases, poorly designed measures may increase costs, reduce competitive pressure, limit access to useful technologies, or weaken productivity. Recognising these trade-offs is not an argument against sovereignty; it is a condition for making sovereignty effective and reconciling Europe’s different strategic objectives.
Zach Meyers’s paper does not assume that all risks arise in all cases. Rather, it identifies the conditions under which they may emerge, and how careful policy design can mitigate them. It also recognises that European providers may, in certain contexts, offer cost advantages (many European cloud companies are cheaper than their larger foreign equivalents, even if they cannot match the same level of functionality). Even where a European firm does not offer cost advantages over foreign competitors today, the paper acknowledges that targeted support can help local firms scale, improve their performance, and strengthen competition over time.
Where risks do exist, Meyers’s paper goes further. It recognises that certain policy objectives — including security, resilience, and reducing exposure to extraterritorial legal risks — may justify targeted measures even where they involve costs and risks. In some instances, achieving higher levels of autonomy or legal insulation may entail economic or operational costs. We can and should expect policy debates to recognise and grapple with these costs, design interventions in ways which minimise those costs, and carefully assess them against the expected benefits.
For these reasons, CERRE’s analyses emphasise the importance of a sector-by-sector approach. Public procurement in cloud services raises different challenges from procurement in areas such as defence, energy, transport, or health. While the broader strategic objectives may be shared, policy tools should be tailored to the specific characteristics and needs of each sector.
CERRE also proudly supports the principle of “balanced openness” and “best tool selection”. This does not imply passivity, nor does it preclude stronger European industrial policy. Rather, it reflects the need to take an evidence-based and targeted approach. This policy advice may seem anodyne. Yet the responses it provokes from those groups pushing “buy European” policies suggest that this policy advice is, nevertheless, badly needed.
Building on this analysis, three priorities are particularly important to ensure that any European preference remains effective, targeted, and aligned with Europe’s wider objectives.
- First, instruments should be matched to objectives and time horizons. Public support should focus on high-potential areas where Europe can build sustainable competitive advantages, particularly in early-stage or emerging technologies. Measures aimed at resilience may justify longer-term support, but should remain tightly scoped to clearly identified dependencies and avoid becoming permanent distortions.
- Second, policy should address underlying market failures. Reducing switching costs, improving interoperability, and lowering barriers to entry are essential conditions for European firms to scale and compete. Some players might push these regulatory steps as alternatives to a European preference – but improving the ability of customers to switch and mix and match different providers is also a prerequisite to any buy European approach succeeding.
- Third, European preference should be embedded within a broader strategy. This includes strengthening the single market, deepening capital markets, co-ordinating with international partners, and ensuring effective use of tools such as export controls and foreign investment screening. These complementary measures are critical to ensuring that when Europe builds capabilities, it can sustain and scale them over time.
CERRE’s work is grounded in an evidence-based and inclusive approach. The paper was developed with input from a diverse steering committee, including representatives from public authorities and European regulators such as the Autoriteit Consument & Markt (ACM), AGCOM, ComReg and CNAM, alongside European and international companies including Booking.com, Amazon, and Microsoft, as well as independent experts. This diversity of perspectives is essential to understanding complex policy challenges.
At the same time, CERRE’s research is conducted independently. The organisation’s funding model is transparent and includes a wide range of stakeholders. This ensures exposure to different viewpoints, but does not determine research outcomes. CERRE’s publications are produced independently of its members and often take positions that differ from those of individual stakeholders.
Europe’s debate on sovereignty and industrial policy is evolving rapidly. There is broad agreement that Europe must strengthen its technological and industrial base, and that past approaches have not always delivered the desired results. The question is not whether Europe should act, but how to do so effectively.
CERRE’s contribution is to emphasise that policy design matters. European preference can be part of the policy toolkit, but it should be targeted, evidence-based, and embedded in a broader strategy that supports innovation, competition, and long-term growth.
