Strategic autonomy requires tailored policies by region and sector

The study, authored by Frank van Oort and Mark Thissen (PBL), was prompted by recent geopolitical developments, including disruptions to international trade routes and shortages experienced during the COVID-19 pandemic. These events highlighted the extent to which the Dutch economy depends on suppliers outside the European Union.

According to Van Oort and Thissen, the transition towards strategic autonomy requires a fundamental shift in economic policy. Whereas policy has long focused on globalisation and free trade, attention is now turning towards industrial policies aimed at strengthening European and Dutch production capacity. New European initiatives, such as the Industrial Accelerator Act, are expected to play an important role in this transition.

Significant regional differences

Frank van Oort and Mark Thissen emphasise that the impact of strategic autonomy varies considerably between regions. Provinces such as North Holland, South Holland and North Brabant are relatively dependent on international supply chains and foreign export markets. As a result, they are more vulnerable to changes in global trade flows than other parts of the Netherlands. An analysis of a scenario in which Europe reduces its dependence on non-European products by 25 per cent shows that the economic effects differ substantially across regions. In this scenario, Gelderland and Overijssel experience modest growth, while Groningen, Flevoland and South Holland face economic contractions of between 3 and 4 per cent. Significant differences can also be found within individual provinces. In Gelderland, for example, the chemical industry could shrink by more than 40 per cent, while the electronics and machinery industries could experience growth of a similar magnitude.

Investing in innovation and alternative supply chains

According to the authors, policymakers should not focus solely on national objectives but also take account of regional economic structures and alternative European trading relationships. Investments in new production technologies and the diversification of suppliers are essential in this regard.

Current industrial policy already contains examples of a regional approach, such as support for the semiconductor industry around Eindhoven and the biotechnology sector in the Randstad region. Van Oort and Thissen argue that competitiveness policy and strategic autonomy should be combined within a single integrated investment and innovation strategy, coordinated at both national and European levels.

Call for supporting policies

Although the overall economic consequences of strategic autonomy may remain limited at the national level, Frank van Oort and Mark Thissen warn of significant regional and sectoral disparities. In some local industries, substantial job losses could occur, the regional ecosystem must be flexible enough for innovation and alternative suppliers, and in the new autonomous reality, regions may lose out on broad prosperity due to distributional effects in the economy. The researchers therefore advocate supporting policies to assist regions and sectors that are adversely affected. Without clear objectives and concrete policy instruments, they argue, it remains difficult to determine where the greatest impacts will occur and how these effects can best be mitigated.

The future of European industrial policy is expected to remain high on the political agenda in the coming weeks. On 18 and 19 June, European leaders will discuss ways to strengthen European industry, followed by a parliamentary committee debate on innovation and industrial policy in the Dutch House of Representatives on 25 June. According to PBL, these meetings provide an important opportunity to translate strategic autonomy into concrete policy measures.