The seemingly inevitable return to regional value chains and to a regional production model will be especially negative for the European Union

It seems clear that the world is gradually going to switch from global value chains to regional value chains. This results from the prospect of higher transport costs, growing demands for local content and rising production costs in emerging countries, leading more pr oduction to take place in the vicinity of the final buyers of goods. This means that production capacity is going to move primarily to regions where domestic demand is growing strongly (Americas, Asia-Pacific) , which is bad news for the European Union. Under this new model, Europe will be less able than in the past to boost its demand by exporting to higher-growth regions and will produce more goods for its own domestic market.