Has the world economy really entered a phase of de-globalisation or deceleration in globalisation after the great recession of 2008-09? Or, rather, are we experiencing a phase of reorganisation of value chains with a shift from global to more regional configurations? Is the increasingly popular term “nearshoring” indicative of a significant trend similarly affecting Europe, Asia-Pacific and the Americas on both the sourcing and destination sides of value chains or are there regionally distinctive trends?

Recent studies addressing some of these questions find no conclusive evidence of de-globalisation but rather a slowing down of the pace of globalisation relative to the ‘hyper-globalisation’ era (1986-2008) (Piatanesi and Arauzo-Carod, 2019; Antràs, 2020). Despite the extensive literature on globalisation trends and the revived interest in the topic due to the emergence of the Covid-19 pandemic (Baldwin and Evenett, 2020) and the war in Ukraine, empirical evidence on the reconfiguration of global value chains (GVCs) that takes into account both the sourcing (production) and destination (consumption) of value added within and across regional areas is still missing.

Taking into account both the source and destination sides of GVCs is essential for envisaging possible strategies and avenues to follow in Europe in line with the concept of open strategic autonomy.

This policy brief applies (and further refines) the well-established input-output methodology (Foster-McGregor and Stehrer, 2013; Timmer et al., 2014; Los et al., 2015) to the – recently released – OECD Inter-Country Input-Output (ICIO) 2021 dataset to shed light on these issues.

We find very clear-cut results on Europe, suggesting two opposite trends on the source and destination sides of GVCs: Europe is increasingly sourcing value added from within the region (which we refer to as “nearshoring”) but exporting value added globally (a so-far understudied phenomenon which we term “farsharing”).

These two trends raise new questions on Europe’s GVC participation. On the one hand, there is the degree to which it is driven by innovation and international competitiveness and, on the other hand, there is the role played by the contraction of domestic demand, partially brought about by fiscal consolidation policies in Europe over the past decade.

In light of this, our evidence suggests that policies aiming at strategic autonomy in Europe should take into account the increasing dependence of the area on foreign demand, especially in relation to the long-standing effects of fiscal consolidation policies on its own countries’ domestic final output. In sum, Europe should not only focus on the sourcing of value added across production processes, but also on the final demand that generates economic activity in Europe.

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