Lhe pandemic first, the war in Ukraine now: in a few years, several violent shocks have exposed Europe’s deep economic dependencies. China had to be relied on – and it was hardly a surprise – for many basic necessities, including masks. Then, the dependence on Russia was demonstrated for gas of course, but also cobalt and vanadium, necessary among other things in batteries, the drone industry and robotics.
More surprisingly, surprising economic ties have been discovered with Ukraine, which is, for example, the main producer of the harnesses that hold together the many electric cables of a car. These parts are of low added value but essential in the construction of cars. However, Ukraine realizes a fifth of the production for Europe, recalled Christine Lagarde, in a fascinating speech, Friday, April 22, in Washington.
Traveling to the United States, the President of the European Central Bank (ECB) moved away from monetary issues to focus on Europe in the face of globalization – or rather in the face of de-globalization. The Old Continent, she recalls, is the one that has played the game of globalization the most, opening its borders very widely. Between 1999 and 2019, the share of trade in European gross domestic product (GDP) increased from 31% to 54%. In the United States, over the same period, the proportion was stable, from 23% to 26%.
As a former pro-free trade head of the International Monetary Fund (IMF), Ms.me Lagarde welcomes it. “The economic benefits have been real”, in particular by lowering the price of imports. But she notes that the triumphant globalization of the years after the fall of the Wall is over. The – real – advantages of this opening of borders only really worked well during “a period of economic and geopolitical stability”.
Avoid every man for himself
The shocks of recent years have exposed two main fragilities. By dint of setting up “just in time” supply chains [capables de produire en harmonie avec la demande], Scattered around the world, companies have become extremely vulnerable to the slightest grain of sand that seizes this beautiful mechanism. Moreover, the world is very dependent on a few essential raw materials, which often come from countries in open tension with the West. “It is estimated that in 2020 China controlled more than half of the rare earth mines and 85% of their refining capacities, reminds Mme. The guard. In the case of Europe, the European Commission has identified 34 products (…) extremely exposed to supply problems in supply chains. »
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