Offensive and Defensive Responses by European Multinationals to a World of Trade Blocs

Abstract

European multinationals show a growing divergence in their response to the formation of regional trade blocs, according to evidence from seven industries. European firms that are strong competitors at the world level are able to adjust aggressively to changes within Europe without disturbing their global strategies. Weaker firms are prone to becoming more inward-looking in Europe, and to risk further loss of global competitive position. The contrast is particularly marked in industries like chemicals and consumer products, which emphasize exports as a means to serve international markets, and the weaker firms are especially prone to call for protectionist help from Brussels in trade-intensive industries, like apparel. While the lobbying pressures on national and European institutions differ according to the global competitive strength of the leading European firms in a particular industry, the effect is one-sided: the pressure for protection or support is strong in industries where the ...

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