Polemics Coverage of the Dialogue of Continents Conference, organized by the Reinventing Bretton Woods Committee, December 4-5, 2023.
The second round table is introduced by Mr. Henning Vöpel, the chair of this panel and director of Centres for European Policy Network. He raises questions about de-risking the transition to a new globalisation and what the new geopolitical order would look like. He states that this transition will need new formats of cooperation while Europe strives to keep its autonomy and sovereignty. Indeed, the EU has been experiencing a strategic deficit that needs to be remedied within the de-risking framework.
The first panellist is Gabriel Felbermayr, director of WIFO, the Austrian Institute of Economic Research. He starts his statement with calling for an improvement of the security of supply chains in the EU. To that end, economists look for market failures or government failures. Market failures include the fact that companies don’t invest enough money in the diversification of their supply chains and don’t consider economic security in their business model. Government failures include high taxation of high profit margins as this creates a lack of incentive to invest in diversification. For Mr. Felbermayr, de-risking means diversifying. He suggests a higher number of free trade agreements, less taxation of high profits to increase business incentive, a more dynamic single market and a harmonisation of EU Economic policies. He ends by stating that some crises are impossible to prepare for, and all we can do is build resilient systems.
Debora Revoltella, who is Chief Economist at the European Investment Bank, picks up the topic by stating that the current transition we are experiencing makes it all the more important to have a unified European response. The US’ Inflation Reduction Act as well as the green transition have been a wake-up call for Europe, and while the EU strongly invests in the green transition, it is facing heavy competition with China. Ms. Revoltella adds that Europe has experienced market failure in the innovation sector, it had been delegating too much power to the national level which had weakened the sector. She gives the audience her set of suggestions, such as diversification of companies to avoid monopolies, and a European reform of the raw materials and energy markets and ends her statement by saying that de-risking is a crucial part of the EU’s single market competitiveness.
The third speaker, Jose Rama Caamaño, is Deputy Director of the Spanish National Office of Foresight and Strategy. He starts by underlining the importance of developing strategic autonomy on a national and European level. Health, energy, digitalisation, and food are the 4 areas he focuses on in his most recent report. He warns that imperial research found more than 300 goods where the EU experiences vulnerability. He lists his suggestions: securing internal production capacities, improving internal capacity of vital services, improving our dependence of chemical fertilisers, targeting our dependencies in the health sector, boosting innovation, developing contingency plans for sectors like health, food and other strategic industries, improving resource efficiency, strengthening EU markets by making them more competitive, and diversifying EU’s trading partners. He ends by telling the audience what he perceives to be the greatest future risk: a fragmented polarised world.
The fourth panellist is Otilia Dhand, who is the Institutional Relations Director at Temasek, an investment firm based in Singapore. Temasek’s areas of interests are the energy transition, digitalisation, healthcare and agrifood. Ms. Dhand expects a greater fragmentation and barriers to trade and investment in the coming years. The current global polarisation means that investment firms then need to find a balance, as investing in certain projects in certain places would cost them investments in other geographies. She states that it would be better if the EU had one foreign direct investment screening process instead of 27.
Problems also arise because of the fact that small countries, even wealthy ones, are more at risk than bigger developed countries who have more to invest in building up a vital sector like chips. Her suggestions for the EU includes defining what a strategic sector is, and devising the rules that protect EU critical supply chain infrastructure. Her last advice is simply to let everything else be.
The last speaker is Marek Mora, Deputy Minister of Finance of the Czech Republic. Mr. Mora’s stance is clear: while globalisation has had many advantages, China has not been playing by the WTO rules, and because of its autocratic regime, many countries see it as a potential threat. It would be dangerous if China weaponised its economic potential against the rest of the world. The poly-crisis in Europe starting in the late 2000s, the US’s populist turn with Trump’s election, and Germany’s change in economic policy, has raised a lot of questions in the economic sector of the EU. Mr. Mora also asks whether we want the EU’s competition authority to be a political body, as is currently the case, if fiscal rules are being applied in all EU countries, or if wealthier countries get a pass. He suggests that we re-establish a strong relationship with the US, which is independent of presidential mandates, and that the WTO rewrites its rules to accommodate for Chinese specific features, as well as that Europe’s institutions stick to their mandates (for example, that the European central Bank is responsible for inflation, price stability, not gender issues and climate policy). He ends by stating we should work towards a global economic order instead of a global economic disorder.
Written by Paulina Kofler–Warnier, Edited by Anna Riggs
Photo credit: Anne Roos Ververs