Reindustrialization, a big project for Europe

“Economic globalization is faster than political globalization. » In 2006, the American Nobel Prize in Economics Joseph Stiglitz anticipated the political consequences of that event in his book, ” another world”, long before a decade marked by Brexit and the resounding arrival of Donald Trump in the White House.

Sixteen years after the publication of this successful essay, two long years of the pandemic and the outbreak of war in Ukraine may change the cards of unstoppable globalization. In just a few years, many States have suffered the brunt of the effects of offshoring in low-cost countries. For their part, multinationals are forced to consider these ongoing geopolitical tensions.

Europe in search of energy and industrial sovereignty

In Europe, governments are fighting a fierce battle to succeed in importing full containers of protective masks from China while hospital intensive care units lack technical equipment (respirators, and etc.) to treat Covid patients. This global health crisis has revealed Europe’s inability to respond to the urgent needs to protect the health of its population.

There is an awareness among leaders of the importance of having a strong industry. This knowledge is linked to questions of autonomy and sovereignty. As long as this knowledge is not there, it is difficult to think about participating in this reindustrialization”, trusted La Tribune Thomas Grjebine, head of the International Macroeconomics and Finance program at CEPII (Center for Prospective Studies and International Information).

In February, Russia’s invasion of Ukraine amplified this shock wave through gas and oil supply chains across the Continent. These successive crises may lead the European states to restore part of their production to ensure their sovereignty not only in energy but also in industry. However, the task is as big for governments.

Erase fifty years of disastrous deindustrialization

The weight of industry in the Old Continent’s economy has been falling steadily for decades. The share of industrial production in the gross domestic product (GDP), i.e. the wealth created, fell from 29% to 22.5% between 1990 and 2020 before recovering slightly in 2021, under the post-Covid impact economic rebound.

Behind this general average, there are marked differences in Europe. While some countries retain a relatively large industrial fabric, such as Germany (26% of GDP according to the World Bank), Italy (22.6% of GDP) or Spain (20.5%), d Others, such as in Greece (15.9%) or France (16.8%), are at the back of the pack.

“In France, there is a very strong trend towards deindustrialization. It is accompanied by a persistent trade deficit. These two phenomena feed each other. France has slowed down the bleeding since 2015, but we cannot yet talk about reindustrialization”, added the CEPII economist.

Between 1974 and 2018, employment in the industry fell by nearly half

In terms of employment, this deindustrialization has been detrimental. Between 1970 and 2021, employment in the industry fell from 5.4 million to 3.1 million, according to the latest figures from INSEE. And during the first five-year term of Macron, the industry lost a lot of jobs (about 4,000 fewer jobs) between the end of the 2nd quarter of 2017 and the end of 2021. The share of industrial employment in total paid employment has fallen over the past four years, from 12.5%​​​​​​at the end of 2017 to 12.1% at the end of 2021.

“Between 1974 and 2018 the branches of industry lost almost half of their workforce (2.5 million jobs), the industry now represents only 10.3% of total jobs”, point the final report in the parliamentary commission of inquiry on deindustrialization.

“When a country deindustrializes, the country loses skills and Innovation is becoming more and more difficult because the industry concentrates 70% on business research and development. The two main obstacles to reindustrialization, if we ask French industrialists, are the lack of skills and the lack of land”, added Thomas Grjebine.

Accelerating reliance on China raises risks

Recent business surveys show that supply difficulties persist for French companies. China’s extension of zero-Covid measures earlier this year helped disrupt global supply chains. It should be noted that Beijing has gained a large place in world trade since its entry into the World Trade Organization (WTO) in 2001. In twenty years, China’s exports have increased by six to the entire planet.

In France, imports from China increased by five over the same period. The former Middle Empire thus became the second largest supplier to the French economy, after Germany, according to a recent customs study.

In their work, the researchers identified nearly 200 vulnerable products from China, compared to only 65 in the early 2000s. This range of products includes textiles as well as “computer, electronic and optical products” or even “metallurgical and metallic” products. By becoming “the workshop of the world”, Beijing has gained a large place in the world economy that is detrimental to the health industry or the high-tech sector in Europe.

Reindustrialize France, a necessity for Macron

In France, the reindustrialization of the coming years must go through the France 2030 plan presented last fall by the President of the Republic Emmanuel Macron. In front of an audience of ministers, business leaders, economists, students and journalists, Emmanuel Macron laid the groundwork for the industrial program for the next five years.

With a budget of 30 billion euros, this plan is intended to support in particular small nuclear reactors (1 billion euros), low-carbon aircraft (4 billion euros), renewable energy (500 million), the decarbonization of industry, agriculture and agriculture. -food (2 billion), or even health (7.5 billion). It will be led by former LREM MP Bruno Bonnell, appointed Secretary General for Investment in January.

Reconciling reindustrialization and climate change

The frequency and intensity of heat waves across Europe is forcing rich states to take climate change into account as they contemplate reindustrialization. In many reports, scientists point to the role of industry in greenhouse gas emissions. Although France has relatively moderate CO2 emissions compared to other countries in the Old Continent, considering the pollution caused by imports (imported emissions) changes the situation significantly.

In fact, in a recent study, INSEE showed that a third of the European Union’s carbon footprint is due to imports. In 20 years, CO2 emissions decreased in Europe by almost 6% while they tripled in China. In France, 40% of the carbon footprint is linked to imports outside the European Union.

The reindustrialization and repatriation of production areas in France will force the government to take seriously this issue of greenhouse gas emissions, which are largely responsible for global warming. Especially since France has made commitments about carbon neutrality.

At this sensitive point, the courts condemned the French State in 2021 for not acting on the climate and forced it to “repairing ecological damage where it is responsible”, before 2022 in its decision revealed last autumn. In this context, the room for maneuver of the next government will be very narrow. “From the point of view of the European Commission, the ecological transition is an opportunity. It can create jobs, investments and help to gain market share around the world. France is in a relatively close position. The industry must reduce its emissions by 35% by 2030. However, this transition will be an opportunity, but also an additional burden for an already weak industry. There will be a significant cost, especially for in the auto industry,” explained Thomas Grjebine.

The increase of relocations in France in 2021: a simple parenthesis?

In 2021, the tricolor industry found colors. According to a report from the Trendéo firm released in the spring, the number of factory openings is higher than the number of closures with a positive balance of 120 new factories (176 creations and 56 closures), the data company said. Similarly, the number of relocations increased from 30 in 2020 to 87 in 2021. Despite these record numbers, many economists and specialists believe that it is too early to talk about a trend. .

In addition, the change in steam may still be delayed due to the deterioration of the global economy. In fact, many companies have fallen into a thick fog since the war in Ukraine. This lack of visibility can slow down or postpone investment projects.