Competitiveness in times of Geo-economic Fragmentation 

Setting the Scene: A Geopolitical update “Integrity in Transition : Culture, Power & Pressure”.

The global power dynamics have shifted and the great powers of the world are reinterpreting their role in the international system. This has profound implications for the global trading system. We have entered a world of ‘fragmented multipolarity’. A world in which the US and China are certainly the dominant players, but middle powers play a significant role in the international system.

Multipolarity does not imply the equality of all major powers, but rather a fragmented system with large "system influencers." These are states that cannot expect to individually dominate a system, but nevertheless can significantly influence its nature through unilateral and multilateral actions. Think of Brazil, India, Saudi Arabia, but also the European Union (EU). These countries explicitly reject the "Cold War mentality" and consciously opt for strategic autonomy instead of one side. The EU calls it "open strategic autonomy," India calls it "multi-alignment," Brazil's "autonomia pela diversificação," and so on.

Furthermore, it is not just a world of several players but a fragmented system. Not ordered around one or two dominant countries, not governed by fixed alliances and institutions but rather characterised by shifting issue-specific coalitions. This will require the EU to adopt a pragmatic approach whilst not relinquishing our values.

We are seeing many countries shirking the rules and norms of our trading system which used to be unchallenged. National security, a legitimate exemption to WTO rules under article XXI of the GATT, is roundly abused nowadays. Between 2010 and 2019, countries invoked this security concern at the WTO only eight times per year on average, but in 2024, the number of notifications reached a record high of 95. Many states, not just the US, are increasingly taking advantage of the absence of a functional Appellate Body to block WTO panel rulings by appealing into the void. Since the Appellate Body collapse, developing countries have accounted for more than half of all appeals into the void. The use of sanctions has exploded and International Investment Agreement (IIAA) terminations have exceeded newly enforced IIAs since 2017.

Trade is reconfiguring accordingly. Geopolitical distance of trade (i.e. trade between politically distant countries) has decreased, as the EU and US are de-risking from China. Meanwhile new high growth corridors are emerging: EU-India, China-ASEAN and India-Middle East.

As competition heats up, China has demonstrated its resolve to stand firm against economic coercion. Caught flatfooted by Trump 1.0, they have clearly expanded their arsenal for supply chain warfare. With its own export controls, unreliable entities list and antitrust reviews, China is leveraging its manufacturing centrality to choke off supplies of rare earths, batteries and green tech. China feels assured that it has won the first round of the trade war in April/May when it forced the US to back off sky-high tariffs with its rare earths export restrictions. A May 2025 national security whitepaper signaled a confident Beijing less willing to compromise.

In this era of ‘weaponized interdependence’ European businesses face a difficult prospect reconciling corporate and European interests. With China aiming to draw in as much technology, capital, and data as possible, while making it harder for firms to move out.

Any rapprochement with China as signaled by the Trump-Xi meeting in South-Korea will be ephemeral as long as Chinese industrial policy enables overcapacity. The outcome of the 4th Plenum (20-23 Oct) and subsequent new Five-Year Plan up to 2030 demonstrates only that China will double down on self-reliance and industrial output.

For example, China’s largest single tax, the value-added tax (VAT), is split evenly between the central government and the local government of the place where a good or service is produced, instead of where it is consumed. Since the system allocates tax revenue to regions based on production, it rewards continuous expansion of industrial bases. Local Chinese officials try to retain as much upstream and downstream activity as they can to expand their tax base. Provincial five-year are duplicates, each promising the same clusters in the same industries, offering discounted land and utilities, and guarantee quick regulatory approvals. The resulting overcapacity is the logical outcome of a tax and subsidy system that rewards scale over selectivity.

Tensions will persist and business will need to navigate the dilemmas of adhering to third country laws and political alignment with the home market. How to balance compliance, impact, and geopolitical realities. It will be the challenge of our time as businesses seek to be competitive under conditions of geo-economic fragmentation.

Casper Roerade is policy advisor for mainports and international supply chains at evofenedex, the leading Dutch association for logistics and international business. He specializes in supply chain resilience, trade policy, and logistics, advising companies on how to anticipate global developments and strengthen their strategic position.

With an extensive network across both the Netherlands and international markets, Casper bridges politics and business to help shape future-proof supply chains in a fragmented global economy.