Finally Different this Time?


Protectionism, deglobalization, re-industrialization. These words mean more or less the same, or at least they point in the same direction. Their connotations however, are quite different. The first one is very negative, while the second one is ‘just’ negative, and the aura surrounding the last one is close to being positive because it has the ambition to create jobs.


In our recent past, multiple moments have played a defining role in the re-industrialization (discussion) in the west. The starting sign for re-industrialization with protectionism as its main weapon was given by US president Trump, and with president Biden continuing Trump’s trade policy, adding active industrial politics to the arsenal. In the EU, a target of increasing the industrial sector’s share of the European economy from 16% to 20% was set in 2012 already. Looking back at the past ten years of EU industrialization efforts, I can only conclude that this policy initiative almost flatlined in results.


Second, the pandemic exposed that long, complex, and geographically dispersed supply chains make an economy vulnerable. Dependence on other countries is even more problematic when these are countries that we do not consider to be our best friends. Just think of the almost $200 billion EU imports in 2021 from Russia (mineral fuels accounting for more than 60% of that) and the US trade deficit with China which exceeds $300 billion. From the perspective of the US the perceived lack of a level playing field plays an important role. Perhaps we are just dramatizing unnecessarily and the US-trade deficit with China is just a bag of hot air.


I am not the biggest fan of the expression ‘this time it’s different’ because it rarely is when you look in the rearview mirror. So, I initially was skeptical about the latest green-re-industrialization policy of the EU: “On 10 March 2020, the Commission laid the foundations for an industrial strategy that would support the twin transition to a green and digital economy, make EU industry more competitive globally, and enhance Europe’s open strategic autonomy” (European industrial strategy ( The following day, the World Health Organization (WHO) announced that Covid-19 was a pandemic, which showed the vulnerabilities of our economic system. 


The current green reindustrialization is not a policy option anymore. If it was just that, I would continue to be skeptical. It has moved to threatening our way of life. First, a genuine tit-for-tat protectionist policy between EU and US seems to be in the making. On 16 August 2022 President Biden signed the Inflation Reduction Act, offering companies billions of dollars of tax credits to boost investment in clean-energy technologies in the US. On 1 February of this year, the EU countered this with its own Green Deal Industrial Plan for the Net-Zero Age (GDIP), which broadly involves the same policy initiatives as in the US. EU industry would probably have been hit hard in the absence of this counter action.


Zooming in on Europe, some research papers argue that the disbursements from the Next Generation EU Covid recovery plan of €750 billion could add up to 1.5-percentage points to EU-GDP by 2024. The GDIP-spending would simply further add to this.  Let’s not forget that individual EU member states are already engaged in providing state support to their industry since March last year when the Commission tweaked the state aid rules to deal with the fallout from the war in Ukraine, with Germany and France accounting for almost 80% of the total support. I am willing to think that this kind of additional government spending will affect a whole range of asset classes, with possibly selective equities taking the lead.


Second, and of greater threat to our way of life especially in Europe, is the war in Ukraine. The war made our fossil fuel addiction painfully clear, and we were forced to go into rehab. We are turning the heater down a bit and taking shorter showers have become part of our daily reality. The current winter is so far a relatively mild one, but what if the next isn’t? All the concerns aside, I am confident that the European fossil-fuel-addicted patient will leave the rehabilitation center as newborn economy.


So, on a global scale there’s the tit-for-tat strategy between EU-US-China (around 60% of global GDP), while at the same time western economies are trying to move away from their fossil fuel addiction. A tit-for-tat strategy essentially involves a reversal of the international division of labor based on the principle of comparative advantage and is therefore wealth-reducing. Or to put it differently, any partial reasoning on a country level means that the rest of the global economy will pick up the bill, regardless of the connotation of the word re-industrialization. After the global financial crisis, the global economy settled on a lower economic growth plateau. Looking ahead, this non-productive tit -for-tat-strategy could possibly shift the global growth plateau further downwards.


Having said this, I really hope that this time is different for the global economy because the current re-industrialization efforts by the west are different in the sense that they emphasize a green and sustainable economy. I hope this will lead to new technologies and procedures, which eventually will benefit the rest of the global economy. In this way the global economy could get a present after initially paying the bill.

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