Competitiveness is no longer limited to a country’s or company’s ability to lead in productivity and offer goods and services at attractive prices. It also depends on the capacity to create value that aligns with political and social priorities in a global environment

Industrial policy is no longer a niche concern—it is a cornerstone for safeguarding economic growth, fostering innovation, and driving global competitiveness.

Governments use these policies to protect supply chains and position their economies to lead sectors considered vital for national security.

However, overreliance on protectionist measures like tariffs will have repercussions such as reducing access to international markets.

The challenge is finding a balance: promoting technological leadership and resilience domestically without sacrificing the accrued benefits of participation in the global economy.

The incoming Trump Administration has already laid out plans to expand the R&D tax credit and offer direct subsidies for building new manufacturing plants.

Similarly, industries the government considers crucial for national security—such as semiconductor production, pharmaceuticals, and rare earth materials—could receive targeted support.

The country is looking for a surge in US-based infrastructure investment that can drive innovation and expand American competitiveness across critical sectors.

These policies set the stage for a sharper transatlantic divide, as Europe grapples with its own industrial and competitive challenges in response.

At the EU level the industrial base is increasingly vulnerable to competitors that are doubling down on subsidies and other protective measures, distorting competition, and reshaping global and regional supply chains in their favour.

As highlighted during 2024, and marked as a key priority of the Commission, Europe needs a complete rethinking and revival of its productive model, its industrial policy, and address the bureaucratic barriers to growth and innovation.

The Enrico Letta and Mario Draghi reports are sobering diagnoses, but they must now materialise into a much-needed sense of urgency and related actions.

A Spring 2023 survey by the European Round Table for Industry revealed that 84% of CEOs observed weakening competitiveness, with 56% citing challenges stemming from a complex or incoherent regulatory environment.

The risk is that the continent will fall behind regions that are removing barriers and strengthening their capacity to attract investment, foster innovation, and dominate global supply chains.

Getting serious about innovation—funding it, skilling for it, and providing people access to it—is essential for the future.

According to the OECD, in absolute terms, the United States leads in R&D spending, with an investment of more than 750 billion euros in purchasing power parity (PPP).

China is close behind, with approximately 680 billion euros PPP spent in this sector.

When considering R&D spending as a percentage of GDP, Israel tops the list, allocating around 6% of its GDP to these activities. South Korea also stands out, with spending near 5% of its GDP.

In the case of the EU, spending on research and development (R&D) varies among member states, but as a bloc, the EU spends approximately 2.3% of GDP on R&D.

Seeing how global blocs and key players on the board devote resources to innovation that give them an edge in industrial positioning is key to understanding the future of competitiveness.

Leading with precision and pragmatism means, for example, redirecting R&D capabilities toward areas of national and global priorities and collaborating with national research centres or accessing government-funded programmes such as Horizon Europe.

Beyond innovation, resilience is now the hallmark of industrial success.

Diversifying supply chains to regions like Southeast Asia or Latin America is critical, but diversification alone is not enough.

Businesses must embed resilience into their operations, prioritising regions with political stability and long-term growth potential.

Where governments are looking to gain advantages, industry and businesses can look deeper and move faster to anticipate their needs and capitalise on policy changes early on.

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