According to Draghi’s report, the global trading system is in a deep crisis. Despite ongoing efforts by the EU to reform the WTO and in particular to reactivate the dispute settlement system, European trade policy must adapt to new circumstances.

This process is already underway: in June 2023, the EU adopted an economic security strategy. This provides instruments to combat dumping, economic coercion and distortions of competition through foreign subsidies. The strategy also aims to prevent technology outflows and enforce sanctions. At the same time, the EU is expanding its bilateral trade network.

European trade and industrial policy must go hand in hand, Draghi demands. It is important to keep trade barriers low while creating fair competitive conditions and safeguarding critical supply chains. Trade measures should serve to increase productivity in the EU and make Europe more competitive.

In addition, the EU must better coordinate foreign direct investment, said Draghi. A common approach to investment decisions could help to drive technological progress and protect European companies in strategic sectors

Demand for new reform steps

In his recent report, former ECB chief Mario Draghi calls for the EU to take massive reform steps. This is the only way the EU can become more competitive and keep pace with the USA and China. Draghi proposes a triad of a coordinated industrial policy, faster decision-making processes and massive investment. In the report, he puts the need for additional investment in the EU at 750 to 800 billion euros per year. This would correspond to up to five per cent of the EU’s gross domestic product. In comparison, one to two per cent of the EU’s gross domestic product at the time was invested in the Marshall Plan. To speed up decisions in the EU, he recommends that in future, decisions in the Council should be taken by qualified majority instead of unanimity. Draghi also believes that bureaucracy must be massively reduced. According to his report, 13,000 new laws have been passed in the EU in the last five years, compared to 3,000 in the USA. Greater integration is necessary to counteract the fragmentation of the EU into 27 national markets. The areas of energy, technology, finance and defence are particularly affected. Team Brussels has analysed where Draghi sees the most urgent need for action and what this means for German companies for the individual relevant policy areas.

Source: DIHK-Newsletter No.26/2024 (German)