The EU's Expanding High-Risk Supplier Framework

The European Union is pushing to reduce its supply-chain dependence on China.

• The European Union is expanding the “high-risk supplier” security framework, first applied to telecommunications infrastructure, into power grids, energy-sector ICT systems, critical infrastructure, and connected vehicles.
• Moves to restrict Chinese-made inverters represent a concrete application of this security framework to grid-connection equipment.
• The European Union’s import structure from China constrains these measures. Its goods trade deficit with China and the broad market share held by Chinese suppliers are key variables limiting short-term supply-chain adjustment.
• Consequently, the practical impact of supply-chain adjustment remains limited relative to the intensity of regulation. Current EU actions show a pattern in which policy signaling precedes the securing of industrial substitution capacity.

Although the short-term effectiveness of supply-chain adjustment is low, these measures establish a meaningful precedent in the European Union’s security-policy stance, indicating that the European Union has begun reclassifying China-sourced supply chains beyond price and trade dimensions as a matter of critical infrastructure security.