Pablo Hernández de Cos: (De)globalisation and economic policies in the European context

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain, at the Dialogue with the Governor on the Future of Globalisation, Cañada Blanch Centre for Contemporary Spanish Studies and London School of Economics and Political Science, London, 9 February 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Let me start by thanking Professor Andrés Rodríguez-Pose, the Cañada Blanch Centre for Contemporary Spanish Studies of the London School of Economics (LSE) and the LSE for their kind invitation, and for giving me the opportunity to hold this dialogue with you on a fascinating topic: the future of globalisation. The questions currently surrounding this topic are of the utmost importance for highly open and integrated economies, such as the euro area and the UK.

The two extraordinary shocks that have recently hit the global economy, the Covid-19 pandemic and, above all, the Russian invasion of Ukraine, have disrupted global value chains and commodity markets, and generated an environment of heightened uncertainty and geopolitical tensions. Added to the past and present episodes of trade tensions between the US and China, among others, these shocks have prompted renewed questions regarding the future of globalisation and the increasing importance of geopolitical factors in shaping international economic relations.

Although the globalisation of goods was slowing down even before the pandemic, concerns about the resilience of global value chains and the supply security of strategic products are now becoming more apparent in decisions made by firms and policy measures considered by governments.

For their part, governments have become more concerned that trade and financial openness may create dependencies on third countries that increase vulnerability to geopolitical shocks. Accordingly, they have started to include geopolitical considerations in their economic decision-making, with policy initiatives that aim to limit such external vulnerabilities, for example, by encouraging the local production of strategic products such as semiconductors or by screening incoming foreign direct investment on grounds of national security.