A report published by the European Investment Bank and the European Commission explores EU firms’ resilience strategies to global supply chain disruptions.
On 3 October 2024, the European Investment Bank (EIB), in collaboration with the European Commission’s Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW), published a report addressing global supply chain disruptions. The report explores factors and strategies that help EU firms boost their resilience against these disruptions.
International trade plays a key role in increasing productivity in Europe as it can create jobs and decrease the prices of goods and services. However, recent crises, including the pandemic, US-China trade tensions, Russia’s invasion of Ukraine and the energy crisis, have exposed structural vulnerabilities in global supply chains and strained the EU’s access to strategic resources. European policymakers have responded to these challenges by maintaining open strategic autonomy. This approach includes reducing dependencies, strengthening the EU single market, and relying on Europe’s resources in strategic areas while maintaining strong cooperation with global partners. The EU has adopted several policy measures under this framework, including the Critical Raw Materials Act, aimed at facilitating the EU’s access to key raw materials (see SwissCore article), the European Chips Act, which focuses on semiconductor production (see SwissCore article) and the Net-Zero Industry Act, created to support the transition to clean technologies and energy (see SwissCore article).
The report emphasises that the EU’s deep integration into global value chains has increased its reliance on the global production network and foreign trading partners, highlighting the need to de-risk EU supply chains. Key findings from two surveys conducted by the EIB and DG GROW reveal that 37% of EU importers have reported access to commodities and raw materials as a major obstacle to their business activities since 2022, while 34% have reported disruption in logistics and transport as significant challenges.
The report further finds that investments in innovation play a critical role in helping firms transform their activities to boost resilience to trade shocks. While innovative and digital firms are more vulnerable to trade disruptions due to their strong reliance on advanced technologies, they are also characterised by their adaptability. These firms are more likely to report that access to microchips and semiconductors is a critical barrier to their competitiveness. However, to navigate these challenges, innovative companies proactively respond by investing in digital tracking systems and diversifying trade partners. By adopting these strategies, they enhance their ability to optimise supply chains and mitigate the impacts of trade disruptions.
Another crucial aspect identified in the report is the role of access to finance in mitigating the impact of supply chain disruptions. Firms with limited access to external funding are more vulnerable during crises and struggle to respond effectively. This underscores the need for policy support through grants and subsidies, which can allow companies to respond to trade disruptions effectively. An additional financial buffer would also enable companies to explore new markets, products or services from international suppliers, as cross-country diversification can dampen macroeconomic volatility at the country level. In summary, the report finds that EU firms are effectively addressing recent supply chain disruptions using a multifaceted approach. Instead of disengaging from global value chains, European companies are implementing adjustment strategies and supplier diversification. The report concludes with the recommendation that to support EU firms, targeted policies must be implemented rather than a one-size-fits-all approach. Thus, a key aspect of managing trade disruptions is monitoring externalities. To ensure that the EU can remain competitive and accelerate the green and digital transition, EU firms must be equipped with predictable framework conditions and the necessary finance to diversify their trade partners and invest in innovation.