Article in Journal

Trade, Manufacturing and the Economics of Europe’s Emergencies

Giuseppe Bertola
CESifo, Munich, 2024

EconPol Forum 25 (3), 15-18
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  • Decarbonization and security are worthy goals, but it would be a mistake to think that protection and subsidization of domestic manufacturing reduce their cost
  • Trade restrictions decrease economic efficiency. Creating manufacturing jobs may sound like a benefit, but in advanced countries it increases costs
  • Subsidy-based policies are prone to capture by special interests and need to be funded by tax or debt, which introduce distortions of their own and reduce economic efficiency
  • In theory and in history, wars and climate change are bad, and worse when sanctions and environmental policies cut off beneficial trade opportunities
  • Circumstances may call for building costly walls around a fortress Europe, but strengthening markets, trust, and policies within the EU should have the highest priority

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