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EU trade chief urges for more diverse supply chains after crisis

BRUSSELS (Reuters) – The European Union and its companies need to diversify their supply chains to reduce their reliance on individual countries, but that does not mean bringing all production back to Europe, the EU trade chief said on Thursday.

EU leaders last month stressed the need for the bloc to have “strategic autonomy” after the coronavirus crisis, helped by new rules that will enter force in October to screen foreign investments if they involve critical assets or technology.

Some countries – including Austria, according to EU diplomats – have interpreted that to mean certain production that over past decades been has off-shored, often to Asia, should return to Europe.

However European Trade Commissioner Phil Hogan told EU trade ministers on Thursday that this should not mean the European Union aims for self-sufficiency, telling them in introductory remarks that this would be an unattainable goal.

“We need to look at how to build resilient supply chains, based on diversification, acknowledging the simple fact that we will not be able to manufacture everything locally,” he said.

The issue of supply chains extends beyond medical supplies and food.

Germany said on Wednesday that the country’s economy, the largest in Europe, had entered a recession in March, with collapsing demand and disrupted supply chains having a massive impact.

Dutch trade minister Sigrid Kaag told reporters after the video conference with EU counterparts that there was an awakening to the need to determine the weakest links in value chains.

“How much do you want to start producing again within the internal market? Where do you still continue to procure, and how can you mitigate the overdependence on countries such as China or India when it comes to essential goods?” Kaag said, listing areas for future discussion.

(Reporting by Philip Blenkinsop; Editing by Jan Harvey)