The World Economic Forum in Davos after Trump’s inauguration: The EU in the global economy, AI and Ukraine
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B&K Agency is a public affairs firm specializing in public relations, government affairs, and strategic communications.
World economics, Ukraine and artificial intelligence were among the topics discussed by around 3,000 attendees of the World Economic Forum who met in Davos, Switzerland, this week under the main theme of Collaboration for the Intelligent Age.?First founded in 1971 by Klaus Schwab, the Forum has since become a crucial opportunity for global political, social, and economic cooperation.
Beyond the rising tide of economic growth
As a backdrop to many of the conversations that took place on Tuesday was the new US administration under Trump and especially his intentions to implement a more protectionist economic agenda. This included a commitment to impose tariffs aimed at protecting domestic industries, particularly manufacturing, signalling a shift away from globalisation and multilateralism.?At the Forum, some of these policies were met with a certain scepticism, with President Lagarde defining Trump’s aim to increase US manufacturing by increasing trade barriers as a ‘questionable strategy’ in an economy with low unemployment and an economy running at capacity. Nonetheless, concern about potential trade wars and market instability remains, including in the EU.
In her keynote speech on Tuesday, the European Commission President von der Leyen observed that the world is in a new era of harsh geostrategic competition, with increased “fracturing along new lines”?such as access to raw materials, new technologies and global trade routes. Amongst the challenges that she mentioned were the negative effects on world trade caused by Chinese "state-sponsored over-capacity" and energy supply chain dependencies. The Commission President also underlined the interdependence of European and US supply chains and economies, hinting at the potential loss to be expected by reducing trade, and stressed the EU’s intention to maintain an open dialogue and negotiate with the US – a tone that differed from Trump’s in his address to the Forum. In his speech on Thursday, in fact, the US President stressed his intention to introduce tax cuts for domestic producers and tariffs on foreign goods to fix the 'economic chaos'.
Beyond the state of the global economy, according to many of the experts at Davos, the EU must now “shift gears” to become more competitive and resilient on a global scale, an issue which has dominated the agenda of the Commission at least since the publication of the Draghi report last autumn. This includes not only addressing energy dependencies but crucially, addressing over-regulation and red tape which is hampering innovation and cooperation in Europe – including in emerging industries such as AI, and the industry to which the Forum was dedicated.?
Indeed, the emerging and increasingly dominating Artificial Intelligence industry might become a new element that the EU will have to reckon with in the upcoming years, at least according to CEOs speaking at Davos. Christian Klein, the CEO of SAP – a European multinational software company based in Germany, leading in enterprise applications and business AI – noted on Thursday that the EU is falling behind the US and China?in AI adoption and innovation, despite having strong research institutions, a skilled workforce and potential investments. Cooperation between member states rather than a focus on domestic AI development is one of the challenges in this respect, driven by diverging national regulations as well as the lack of a framework that can support companies in driving the AI transformation and implementing the technology.
Amongst von der Leyen’s latest proposal to increase European competitiveness is the creation of a “28th regime”, a single set of European rules addressing "corporate law, insolvency, labour law, taxation” to overcome the fragmentation of 27 different national legislations – although the timeline is still unclear. The move should serve as an incentive for EU innovative companies to stay within the EU rather than switch to the US market, ensuring that the block can develop competitive emerging technologies to support the transition to a carbon-neutral economy.
Ukraine
Davos also highlighted that EU member states in NATO must step up their game on defence, first and foremost in Ukraine. While there is a consensus on the need to counter Russian aggression, Trump has repeatedly emphasized that the US would not continue to bear a disproportionate share of the alliance's financial burden and criticised European nations for not providing sufficient support to Ukraine amidst its ongoing conflict with Russia, threatening even to leave the Alliance.
Speaking at the Forum on Wednesday, Zelensky underlined that Europe must deliver more to become a credible actor and to guarantee peace and security for itself and others, pointing to the fact that Russia produces several times more ammunition and military equipment than all of Europe combined. Between the interventions of Zelensky, former NATO Secretary General Jens Stoltenberg and the current NATO Secretary General Mark Rutte, a consensus seemed to emerge on the need for the EU and NATO allies to increase military spending and defence industrial production, and the share of spending on help – including delivering arms - for Ukraine.?
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NATO Secretary General Mark Rutte also responded to the Trump administration’s calls for NATO allies to increase military spending, acknowledging that Europe needs to invest more in its defence capabilities. Rutte furthermore emphasised that a Russian victory in Ukraine would severely damage NATO's credibility and deterrence and that if the new administration were willing to keep on supplying Ukraine from its defence industrial base “the bill will be paid by the Europeans” - although there was no clarification as to the specific increase to be expected or on EU leaders agreeing to this commitment.
As von der Leyen noted in her keynote speech, the cooperative world order that many imagined 25 years ago may not have come to reality, with political trends signalling a shift away from multilateralism. If the analysis that the world is becoming increasingly competitive is accurate, for the EU to remain a relevant actor dynamic change is needed, a change which the European leadership has repeatedly endorsed but which has not necessarily resulted in swift action.
The multiple challenges that the Union is facing, from the need to quickly advance in AI technology development, to supporting its own businesses and its neighbouring countries, significantly require simplification and cooperation, inside the block and beyond, as many of the panels have noted. Additionally, as Zelensky and many others have underlined, for the EU to untap its potential on the global stage, as a significant ally and power, the EU might need to learn how to be more proactive in facing upcoming challenges rather than merely responding to developments. ?
Still, this ought not to be done in isolation. As many of the discussions at the Forum stressed, and as the main theme ‘Cooperation for an Intelligent Age’ suggests, cooperation is still the key to many of the innovative changes and solutions that the world needs, underscoring the continued importance of international fora. From climate action and global health to technological innovation and economic recovery, the annual occurrence of forums such as that in Davos underscores a belief that meaningful progress requires nations, businesses, and communities to bridge divides and work together, finding new solutions and collaborations even in a context that might not be that of multilateralism of 25 years ago.
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