2024-02-13 16:56:43
An attempt to reduce dependence on imports and further stimulate domestic production in Europe may come with serious economic costs.
As Day.Az reports with reference to Gazeta.ru, Kommersant writes about this with reference to the ECB’s working report.
The authors of the study analyzed the medium- and long-term effects of replacing imported resources used in the production of export goods with their own. Among the most likely consequences of such import substitution are accelerated inflation, a decrease in the productivity and competitiveness of European companies, as well as a reduction in global trade volumes.
According to ECB economists, the use of more expensive and lower quality local resources instead of imported ones will lead to higher prices for the products of European producers. At the same time, their productivity will decrease due to worse production conditions. In addition, retaliatory measures by EU trading partners could have a negative impact on global trade volumes.
In the long term, the quality of local companies’ products may suffer due to the loss of international competition in Europe. The transition period will require significant costs, which will only increase over time against the backdrop of accelerating inflation.
The ECB report notes that a reasonable alternative is to seriously limit import substitution policies. Economists suggest applying it only to goods whose supply may actually be interrupted. Also, import substitution should be focused in industries that already produce competitive products.
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