European Industrial Policy: A crucial element of strategic autonomy

European Strategic Autonomy series - Economy & Trade

Policy Brief

19/05/2022

This Policy Brief, as part of a more extended reflection of the European Strategic Autonomy, reflects on the relevance of a solid industrial policy and the main lines of action to construct it. Russia’s war in Ukraine has ushered in a new era for Europe’s economic diplomacy, supply security, and military spending. The war poses a fundamental challenge, and the EU has also set ambitious goals for decarbonisation and digitalisation.

The EU needs to recalibrate its approach and focus on (the emergence of) key industries and essential supplies, and provide critical infrastructure in Europe. The right balance between selective protectionism and openness to trade and investment needs to be struck. The goal of industrial policy should not be to produce everything at home but to preserve production capability. To this end, Europe should target new products or technologies rather than existing ones, enhance market competition rather than protect actors from it, and help more productive companies rather than unproductive ones. The EU could do this with strategic regulation, FDI screening, public procurement, and other tools while shielding policies from special interest and inefficiency.

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