Policy Briefs

C. Bastasin: Post-war global supply chains – Europe must defend economic cooperation

The European Union is the most open trading area in the world. Changes in the flows of imports and exports have a more profound impact on the EU’s GDP than that of the U.S. or China. Over the last two decades, however, the impact of external events on growth has become more difficult to gauge because of the elusive nature of global supply chains, whose relevance is prevailing on simple trade flows and volumes. Supply chains need more stable international relationships than trade, which does not always require huge capital immobilization and can thus be more easily diverted to different countries. While the pandemic crisis after February 2020 exposed some structural fragilities of global supply chains, the war in Ukraine, after February 2022, is dramatically redesigning international strategic relationships and economic alliances. In this brief, we will try to present some of the dynamics that are taking place – mainly in the US – in engineering supply chains. Re-shoring is being replaced by friend-shoring, implying the dependence of economic relationships on strategic alignment. In this regard, the evolution of the US supply chains, and its conceptualization, will have a relevant impact on the future of the European economy. However, Europe will have a more vital interest once peace is brought back to Ukraine: persuading the major global players to acknowledge the common goods – not only peace, of course - that require global cooperation. Climate change and economic cooperation are at the top of the list and cannot be achieved in a divided world.

Click here to read the paper