EU launches strategy to diversify supply chains

12 May 2021

The European Commission (EC) has outlined an industrial strategy to reduce reliance on foreign suppliers for critical materials and products. 

The updated strategy, which was initially set out in March 2020, seeks to enhance the bloc’s “strategic autonomy” in areas such as raw materials, batteries, active pharmaceutical ingredients, hydrogen, semiconductors, and cloud and edge technologies.

The EC said the updated strategy would respond to the “lessons learned from the [Covid-19] crisis” to boost the EU’s recovery.

While “openness to trade and investment” is a strength for the EU, “the pandemic also triggered wider awareness of the need to analyse and address strategic dependencies, both technological and industrial,” it added.

Analysis of trade data found 137 products out of 5,200 originated from “sensitive ecosystems for which the EU is highly dependent”, mainly in energy intensive and health industries. 

Another 34 products were identified as being “potentially more vulnerable given their possibly low potential for further diversification and substitution”, it said. 

The strategy recommended the bloc works “towards diversifying international supply chains and pursuing international partnerships to increase preparedness”.

It also said the EC would support SMEs, through “significant investment” as well as implementing “alternative dispute resolution” schemes to address payments delays in order to ensure EU single market resilience. 

Valdis Dombrovskis, executive vice-president, said: “Resilient global supply chains are essential in times of crisis as they help absorb shocks and speed up recovery. As we emerge from the Covid-19 pandemic, our updated industrial strategy aims to leverage Europe's position as a global industrial leader in order to provide a competitive edge in digital and green technologies. 

“We will seek cooperation with like minded partners wherever we can to support open, fair and rules-based trade; reduce strategic dependencies; and develop future standards and regulations: all of which are critical for our economic strength.

“At the same time, we stand ready to act autonomously whenever we must to defend ourselves against unfair practices and protect the integrity of the single market.”

Commissioner Thierry Breton, responsible for the internal market, added: “The real industrial revolution is starting now – provided we make the right investments in key technologies and set the right framework conditions.

“Europe is giving itself the means for an innovative, clean, resilient industry which provides quality jobs and allows its SMEs to thrive even during the recovery process.”

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