Europe’s risk aversion affects the whole world

From digital policy to transport, the EU's overly prescriptive approach to risk is unwise and costly.

Engin Aykurt, Unsplash
Engin Aykurt, Unsplash

The European Union doesn’t have a healthy way of managing risk. This was graphically demonstrated in March when many EU countries temporarily banned the use of the AstraZeneca coronavirus vaccine, against the advice of the European Medicines Agency (EMA), and in the absence of any conclusive evidence that it was causing any harm. 

This was not an isolated case. The “precautionary principle” has been a defining characteristic of the European approach to managing risk for over two decades. It mandates caution until there is clear scientific evidence that something is safe, even if the alternatives are known to be less safe or clean. It is the chief inspiration behind the “hazard”-based approach to regulating potentially dangerous substances, which now governs chemical approvals and is increasingly becoming the basis for EU restrictions on pesticides and GMO crops. It is not confined to the European Union alone: its member states are equally as guilty. Germany ordered the closure of its nuclear power stations after the Fukushima disaster, for example, and now has to rely on dirtier coal stations. 

This risk-averse attitude now informs most EU action and is the prism used to regulate other policy areas such as environmental standards, financial regulations or even the import of cultural goods from Britain or the US, which are now subject to a licencing regime aimed at stopping ISIS-looted artefacts entering Europe from those countries, a theoretical risk at best. 

Managing risk dictated the EU’s approach to the Brexit negotiations, specifically the risk that the UK could undercut the EU’s single market. It dictated the Commission’s flirtation with banning the export of vaccines into Northern Ireland in case some found their way to the rest of the UK. It dictates the EU’s food safety rules, which mean that many products can’t be imported into the EU at all. From digital policy to transport, the main motivation for the EU is to manage risk, yet it does it by taking an overly prescriptive approach to all these policy areas. 

This impacts Europe in negative ways, as costs are higher and choice is less than it should be, and focusing on one type of risk often ignores a different, more significant risk, as is the case in the pandemic. However, despite this it is often an approach that the majority of Europeans are comfortable with. It is also a necessary one for a union of 27 countries as it allows the Commission to ensure internal harmonisation across its member states. It allows clear instructions to flow from Brussels to national governments and for policy objectives to be fulfilled. If each country had flexibility to judge risk, it would fragment the single market. As a result, Europe’s perceived risk aversion will be with us for a very long time. 

Many of Europe’s trade and wider geopolitical problems also stem from this approach. European risk aversion has become one of the biggest problems in the global trading environment and reduces trade and investment around the world. It is the chief reason an EU-US trade agreement can’t be done and also why trade-focused development policies such as the Generalised Scheme of Preferences have not succeeded. 

Worse still, as other countries watch the EU erect barriers which conveniently protect producers from competition, and listen to Europe’s justification for them as “safety” or “environment” related, they are quick to do the same. This is a key reason why the biggest problems in global trade are now non-tariff barriers.

However, this risk aversion will not disappear anytime soon. In many ways it is now a defining ideology of the European Union. And while its contradictions and impact on growth are plain to see, many in Brussels will point to it as a source of pride and as an example of how Europe does things differently. For those seeking to understand the ideological difference between Europe and the rest of the world, this is the place to start. For those seeking to do business with Europe or to negotiate with it, understanding this is crucial, even if they don’t always like it.


Daniel Dalton is CEO of the British Chamber of Commerce in Belgium and a former MEP for the West Midlands

14th April 2021