Towards a World Integrated and Socio-economically Balanced European Economic Development Scenario

Project Information

TWIN SEEDS

Grant agreement ID: 101056793

DOI

10.3030/101056793

Project closed

EC signature date 2 June 2022

Start date 1 October 2022

End date 30 September 2025

Funded under

• Culture, creativity and inclusive society

Total cost

€ 2 707 496,50

EU contribution

€ 2 707 496,50

Coordinated by

POLITECNICO DI MILANO
Italy

Periodic Reporting for period 2 - TWIN SEEDS (Towards a World Integrated and Socio-economically Balanced European Economic Development Scenario)

Reporting period: 2024-01-01 to 2025-09-30

Summary of the context and overall objectives of the project

The objective of the TWIN SEEDS project is to investigate changes in international trade and production patterns, specifically in global value chains (GVCs), both those of a longer-term nature (driven by the "twin seeds": technological developments and geo-political changes) and those that are taking place in the wake of the Covid-19 pandemic.

TWIN SEEDS has four main objectives:

Obj. 1. To explore the geographical reorganization of Global Value Chains (GVCs) under the transformative geopolitical, economic and technological conditions, paying particular attention to key players within GVCs, especially Multi-National Enterprises (MNEs) and their production networks.

Obj. 2. To highlight the effects of the challenges posed by the COVID-19 pandemic to trade relations and GVCs in general, and to international production in key strategic sectors such as health, in particular.

Obj. 3. To analyse how recent and emerging technological developments and GVCs restructuring are impacting on social inequalities, through changing international production structures and shifting work organisation, employment opportunities and job requirements.

Obj. 4. To construct optimal, multifaceted scenarios for a spectrum of interrelated policies in the key policy areas of trade and investment, competition and social policies. The scenarios will form the basis for suggested policy recommendations.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

TWIN SEEDS objectives are strictly related to the Work Packages (WPs) of the project, and to specific actions and research lines undertaken, as summarized in Table 1. In the first reporting period, TWIN SEEDS fully achieved Obj. 1 and Obj. 2.

In the second reporting period TWIN SEEDS fully achieved the following objectives:

Obj. 3. the recent and emerging impacts of GVCs and MNEs on i) employment and inequality (WP3), ii) the environment (WP4), and iii) growth, productivity and competitiveness (WP5). The research activity led to research outcomes collected and discussed in three research reports (corresponding to D7, D8 and D9), made publicly available on TWIN SEEDS website and submitted to the Participant Portal in due date.

Obj. 4. Based on findings from previous WPs, TWIN SEEDS developed future foresights on the way in which trade will impact on economic performance and the environment. Importantly, in accordance with the EU Commission, the project’s focus and scope was enriched with respect to the initial proposal, so to capture the long-term future effects of actions like Trumps’ tariffs war, the Ukraine-Russia and Middle East war and their consequences in terms of trade reconfiguration. The research on this issue was conducted within WP6, and more details will be provided below, in the detailed presentation of the WPs. The output of the research was published in the form of a report (Deliverable D12, “New normal scenarios for Europe”, submitted on the Participant Portal in Month 34).

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

WIN SEEDS research provided several results going beyond the state of the art in the relevant scientific literature and knowledge on the topic. Here below the main results are reported, by WP.

WP3
- The geographical extension of GVCs: The COVID19 pandemic revealed the vulnerabilities of global production networks, likely to result in lasting changes in employment patterns, with potential increases in job polarization.
- Job polarization and inequalities: Participation in GVCs has exacerbated job polarization across Europe, particularly in regions where foreign enterprises play a dominant role in local economies.

WP4
- The impact of GVCs reshoring on carbon emissions. Scenarios of reshoring strategies for five selected strategic products generate reductions in the EU carbon footprint (CF). Considering that imports relocated are below 1% of total EU imports, the most significant reductions in emissions are achieved by reconfiguring the iron and steel supply chains.
- The impact of firms’ reshoring strategies on the re-use of end-of-life products. Case study analysis shows that achieving scale and volume is a major barrier for Circular Economy (CE) practices and take-back systems.

WP5
- The spillovers following nearshoring. While nearshoring might offer benefits such as reducing supply chain risks and strengthening intra-regional ties, it could restrict the regional and societal benefits of broader knowledge spillovers that MNEs gain from their extensive global networks, which likely form part of broader long-term business strategies.
- The regional distribution of the productivity effects of GVCs reconfiguration. Nearshoring is not a panacea for global supply chain resilience, productivity, and growth. While the strategy offers potential benefits, such as reducing risks and promoting within-region prosperity, the distribution of such benefits is uneven.

WP6
- Scenario on the effects on European productivity growth under disincentives for US FDI. The decrease in US FDI in Europe generated by rising trade barriers would have a negative impact on the EU. Policies that reduce trade and investment flows are associated with slower productivity gains.
- Changes in households’ final demand can have an impact on CO2 emissions and even under extreme circumstances, such reductions tend to be short-lived.
- WP6 findings report, relative to the reference scenario, growth advantages for specific groups of regions. The main beneficiaries of a New Normal Trade policy scenario would be located in core areas, attracting control functions and already hosting major manufacturing hotspots.