Managing the What Ifs: Europe, China and world trade
May 15, 2024
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Bruegel Director Jeromin Zettelmeyer and CEPR President Beatrice Weder di Mauro discuss Europe's need for economic security amidst global uncertainties. They explore de-risking imports, combating economic coercion from China, and building resilience against potential shocks. The podcast highlights the delicate balance between competitiveness and security concerns in decision-making.
Europe must enhance resilience in supply chains to mitigate economic disruptions effectively.
Balancing competitiveness and security involves strategic planning to address trade-offs in trade specialization.
Deep dives
The Necessity of Economic Security for Europe
Europe's economic security is crucial due to the changing global geopolitics and the need to respond effectively to stronger external forces. This urgency led to the initiation of the IITCAI project, focusing on common European interests, particularly on economic security. The project delves into protecting against economic malfeasance from external actors, such as states or disrupting factors like terrorism, trade issues, and financial vulnerabilities.
Strategic Autonomy and Economic Security
Economic security, a vital aspect of strategic autonomy, involves safeguarding against economic threats and crises. It comprises protecting against deliberate harm from external actors and dealing with external crises that affect trade and finance. The COVID-19 pandemic highlighted the importance of resilience in supply chains and the need to mitigate economic disruptions effectively.
Balancing Competitiveness and Security Concerns
Navigating the trade-offs between competitiveness and security entails considering the cost of insuring against sudden disruptions versus the benefits of specialization in trade. Specialization can enhance welfare gains from trade but also increase vulnerability to supply chain disruptions. Addressing these trade-offs involves strategic planning to balance competitiveness with security concerns.
Importance of Resilience and Deterrence in Economic Security
Fostering resilience and deterrence mechanisms is essential to counteract economic coercion and threats effectively. Enhancing resilience through the European single market can provide more options for trade and reduce vulnerabilities. The introduction of the anti-coercion instrument enables the EU to retaliate against countries engaging in economic coercion, enhancing deterrence strategies and safeguarding economic interests.
In a world of increasing uncertainties, the European Union’s need to protect itself from new shocks is on the rise. Pandemic-related supply disruptions, the energy crisis provoked by Russia’s invasion of Ukraine, and economic coercion coming from China have all shown that the EU needs to do more to prepare itself for what may come. But how should Europe de-risk its external relationships without foregoing the benefits of trade? Rebecca Christie talks to Bruegel Director Jeromin Zettelmeyer and CEPR President Beatrice Weder di Mauro about their new report, “Paris Report 2: Europe’s Economic Security”.