Article in Journal
Trade, Manufacturing and the Economics of Europe’s Emergencies
Giuseppe Bertola
CESifo, Munich, 2024
EconPol Forum 25 (3), 15-18
CESifo, Munich, 2024
EconPol Forum 25 (3), 15-18
- 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