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Opportunities for Europe in the New Space Race

Executive Summary Flagship space programs will improve Europe’s global standard-setting capability

  1. The US is weighing the benefits of outbound investment screening (OIS) to counter China. Introducing de facto capital controls requires Europe’s support, putting the transatlantic relations to a test.

  2. The goal of OIS is “soft decoupling” to prevent the offshoring of increasingly discrete supply chains in aerospace, semiconductors, AI, IT, robotics, and other critical tech sectors to non-allied third countries.

  3. The EU has focused on space-based capabilities mainly to enable stronger continental defense and now faces the challenge of integrating discrete projects across member states and institutions

State of Play Different dimensions of competition in outer space

The idea of introducing a – US-only if needed, but preferably transatlantic – outbound investment screening (OIS) is gathering steam. This mechanism aims to screen and, eventually, ban certain US and European investments into critical tech sectors in non-allied third countries. The implicit goal is to prevent China from acquiring critical technologies through political pressure and, effectively, capital controls. Yet, capital controls increase economic costs and risks for American and European companies – from compliance burdens and higher risk premiums to a loss in strategic competitiveness. Washington’s actions are guided by geopolitical, not commercial, reasoning. The Biden administration is likely going to make it a central request to Europeans in confronting China. Many European countries are skeptical, but prioritize a strong transatlantic partnership. Furthermore, EU governments see increasing risks in being tied to Beijing-controlled tech supply chains.

Key Issues A race for technology and regulation

Rivalries among states competing for power on Earth have not precluded space cooperation. The most prominent cooperative effort, the International Space Station (ISS), connects two historic competitors, the United States and Russia, with Canada, Japan, and the European Space Agency (ESA) in pursuit of ground-breaking science. However, states are becoming more proficient space actors as innovation reduces barriers to space access. Reusable launch vehicles, improved satellite manufacturing, and revolutionary operational constructs have lowered the costs to access space. These technological innovations have flattened states’ comparative advantages, allowing them to choose ideologically close partners instead of having to collaborate with political opponents that command a specific technology needed.

States still compete for technological superiority, but the major contest among leading states has evolved into a sprint to attract a critical mass of partners to establish a preferred spatial order. For instance, the United States has invited all nations to sign the Artemis Accords, a set of obligations based on Washington’s interpretation of existing international law. Furthermore, the U.S. Department of Defense recently issued internal guidelines for space behavior. These tenets could be an attempt to seed a future universal regulatory framework for space. China, too, is aiming to influence the rules in space by establishing ties with countries in Asia, Africa, and Europe through its Belt and Road Initiative (BRI). The space-related aspects of BRI focus on constructing space and ground segments, integrating services, and guaranteeing coordinated policies for future collaboration. China is expected to eventually leverage these relationships for support of its preferred governance methods and practices.

Europe’s continued challenges in space despite a new strategy

The EU has pivoted from considering space as a scientific pursuit to seeing it as an enabler of strategic sovereignty. The aim is to ensure the bloc can credibly and independently operate in and through space without relying on foreign systems. European programs like CHEOPS for planetary discovery and Rosetta for comet inspection already indicate scientific mastery, while launch vehicles like Ariane 5 evidence a strong industrial base. Adopting civil systems into security missions allows the EU to leverage this expertise to support strategic autonomy. For example, the EU has incorporated civilian systems for Earth observation (Copernicus) and global satellite navigation (Galileo) into its security network to support force readiness and lethality. These arrangements not only lower Europe’s dependence on foreign systems, but also support the EU’s strategic autonomy by bolstering security and economic prosperity.

The European Defence Agency has prioritized developing space-based and -related capabilities to both protect space assets and reinforce long-term technological sovereignty. Major focus areas relate to deriving information superiority from space by leveraging Positioning, Navigation and Timing (PNT), tactical Communication and Information Systems (CIS), Intelligence, Surveillance and Reconnaissance (ISR), and Space Situational Awareness (SSA), among others. This process started with establishing EU-wide defense requirements. Now the challenge is to integrate discrete projects across states and institutions – a task assigned to the European Commission’s Directorate General for Defence Industry and Space.

Europe faces several challenges in space. European countries and the EU itself have traditionally been junior partners in bigger missions and now struggle to initiate novel flagship programs. Tying ambitious projects in space to other strategic goals like shaping Europe’s digital future as well as reaching the EU’s climate goals could galvanize political will and open new funding streams. Moreover, tangible European assets in orbit would improve the continent’s standards-setting capability, which will be a critical aspect in efforts to systematize space traffic coordination and other much-needed orbital regulations.


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