# Mercantilist and protectionist shocks on innovation, growth, and economic policy in European regions

## TL;DR

This paper examines how global shifts toward protectionism affect innovation and growth in European regions.

## Contribution

The study introduces a novel EU-wide regional input-output approach to analyze trade shocks on innovation and growth.

## Key findings

- STI-driven and DUI-driven regions face distinct impacts from trade shocks.
- Global value chains complicate regional innovation and growth outcomes.
- Trade-in-value-added effects reveal indirect impacts across EU and non-EU regions.

## Abstract

We assess the potential innovation and growth implications on European regions of the rapid global shifts in political economy towards mercantilism, tariffs, and protectionism. The new trade shocks have the potential to reshape the geography of European innovation, and we examine the likely global value-chain implications on regional innovation in both STI-driven and DUI-driven regions using a unique EU-wide regional input–output database. The analyses undertaken here using the EU EUREGIO-FIGARO datasets allow us to incorporate not only the direct demand-transmission effects of international trade on different EU regions, but also the full trade-in-value-added logic, which also includes the indirect effects of GVCs spanning EU regions and non-EU countries. We demonstrate that both STI-driven and non-STI/DUI-driven regions are exposed in different ways to these trade shocks, and that Europe’s territorial innovation, growth, and development challenges are likely to become even more complicated in today’s global political context, depending on where regions are positioned in global value chains.