The ongoing war in Ukraine has trans-formed the EU and the Western World. With 11 sanction packages against Russia, geopolitics is back. Over the last two years we’ve seen a complete reorientation in energy markets, and the EU is seeking to expand and defend its sphere of influence with new accession candidates, and many are waiting. With the “Global Gateway” project and the European Political Community, Europe is fighting back against Russia’s view of the world. Meanwhile Europe is seeking to decarbonize rapidly. Carbon leakage remains to be tackled, also the view of the ETS. The EU has taken a rule-based approach, and it needs to be seen if EU’s Carbon Border Adjustment Mechanism will function and whether heavy industries will delocalize as a result of green measures.
It’s likely that as a result of these developments, EU governments will become more involved in affairs related to large and critical infrastructure, and supply chains will need to be protected, no matter the cost. In the EU we observe that infrastructure spending is accelerating as countries grapple with supply chain pressures, seek to stimulate economic activity and adapt to climate change. At the same time companies continue to move towards friend-shoring, manufacturing and sourcing components and raw materials with countries with shared values. Favoring the friend-shoring of supply chains to trusted countries could allow for the extensions of market access to trusted trade partners, which is particularly important at times of crisis when regular supply chains fail to operate.
It’s unlikely that pre-2008 trade flows will return, and the trend of “slowbalization,” energy transition and inflation will push both global and European trade at best into a growth in line with GDP growth. The logistics industry will need to demonstrate its resilience again. The private sector will need to prepare for troubled waters — even in the most promising scenario, small firms will come under pressure and more focus on pricing, procurement and productivity will be a necessity to survive or be eaten by larger players.