all projects

Future-proof
strategies for Europe

Client

vbw – Bavarian Industry Association

Year

2024


The world (economic) order is off the rails: In addition to the digital and green transformation, global trade is increasingly dominated by deglobalisation, disrupted value chains and geopolitical uncertainty. Germany and Europe's economic power is being put to the test.

In this context, Prognos examined possible foreign trade strategies. The short study on behalf of the Bavarian Industry Association shows – the USA and China will set the main course, but Europe also has room for manoeuvre. Companies and foreign policy can seek out new international partners, strengthen multilateral relationships, and thereby reduce geopolitical risks as much as possible.

A (new) business model for Germany and Europe

Europe, and in particular Germany, have for decades benefitted from globalisation and the prevailing economic order. In recent times, however, it seems that cross-border cooperation has, at best, reached stagnation. The foreign trade sustainability of the European – as well as the German and, thus, also the Bavarian – business model is at stake.

Broadly, four external economic strategies are conceivable:

  • De-coupling and formation of trading blocks: If the world does divide into geopolitical blocs, comparable to the Cold War period, significant economic damage will result.
  • Re-shoring or relocation: When companies relocate their manufacturing facilities to be closer to their headquarters and seek out suppliers in the surrounding area, geopolitical risks are reduced, but economies are also significantly restricted.
  • De-risking through diversification: Opening up new, widely dispersed procurement and sales markets reduces the geopolitical risks of trade, but requires increased entrepreneurial and political efforts.
  • “As-before” - strategy: Companies and policy could simply ignore the changed world situation. This would, however, entail major business and economic risks.

Overall, de-risking represents the best possible middle course among the four strategies. 

What can policy makers and companies do?

Internationally active companies can implement the de-risking strategy by adapting the concept to their business model and risk profile. Policy makers are responsible for the following tasks:

  • Creating reliable and rule-based framework conditions
  • Strengthening the World Trade Organisation (WTO)
  • Concluding new free-trade agreements

Our approach

The study is based on the analysis of statistical data and the evaluation of the relevant scientific literature. In addition, we draw on the preparatory work from previous studies conducted on behalf of the vbw – Bavarian Industry Association.

Links and downloads

To the study (vbw website, in German)

Project team: Dr Michael Böhmer, Johann Weiss, Eva Willer

Latest update: 17.04.2024

Do you have questions?

Your contact at Prognos

Johann Weiß

Senior Project Manager

View profile

Eva Willer

Consultant

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Prognos is one of the oldest economic research centres in Europe. Founded at the University of Basel, Prognos experts have been conducting research for a wide range of clients from the public and private sectors since 1959 – politically independent, scientifically sound.

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