Trade policy, industrial policy, and the economic security of the European Union

Chad Bown

No WP24-2, Working Paper Series from Peterson Institute for International Economics

Abstract: Out of fear about its economic security, the European Union is transitioning to a new form of international economic and policy engagement. This paper explores some of the major trade issues surrounding the bloc's economic security, the role of trade and industrial policies in achieving its objectives, and some of the economic costs of doing so. It begins by explaining why economic security is suddenly playing such a prominent role and providing early evidence to motivate these government interventions. It then turns to a case study--new policies associated with China's exports of electric vehicles and graphite--that highlights the difficult choices and practical challenges the European Union faces in tailoring policy to address concerns over economic security. The paper then introduces the domestic policy instruments that the European Union, its member states, and other governments are pursuing to address economic security, including stockpiling and inventory management, investment or production subsidies, tariffs, export controls, and regulations on foreign investment, as well as the scope for selective international cooperation over such policy instruments. The paper concludes with some caveats about abandoning interdependence and lessons from history.

Keywords: Economic security; supply chains; industrial policy; trade policy; tariffs; subsidies; export controls (search for similar items in EconPapers)
JEL-codes: F13 L52 (search for similar items in EconPapers)
Date: 2024-01
New Economics Papers: this item is included in nep-eur, nep-int and nep-inv
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Citations: View citations in EconPapers (1)

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