The Sound of Economics Managing the What Ifs: Europe, China and world trade
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May 15, 2024 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.
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Two Faces Of Economic Security
- Economic security has two parts: protecting against deliberate external economic harm and limiting transmission of external crises through trade and finance.
- Domestic crises are separate and measures to guard against external threats can increase domestic vulnerability.
Think Of Security As Insurance
- Prepare for new types of shocks by treating policies as insurance against low-probability, high-cost events rather than only as competitiveness measures.
- Shortening or diversifying supply chains can be worth paying for as an insurance premium against severe disruptions.
Trade Specialization Creates Trade-Offs
- Specialization brings welfare gains but raises vulnerability to disruptions, creating a clear trade-off between trade benefits and security.
- Aggressive de-risking risks political costs, reduced international cooperation, and EU cohesion problems.