beyond fragmentation : economic resilience in a shifting world opening remarks by fabio panetta * governor of banca d ’ italia g7 - seminar on ‘ a fragmenting trading system : where we stand and the implications for policy ’ banca d ’ italia rome, 15 november 2024 ladies and gentlemen, it is a great pleasure to welcome you to this g7 - seminar on ‘ a fragmenting trading system : where we stand and the implications for policy ’. we are meeting today just a few hundred metres from palazzo dei conservatori, where the treaties of rome were signed in 1957. the treaties laid the foundations for the european economic community and the european atomic energy community. they set in motion a vision of cooperation and shared prosperity that still resonates strongly in the world today. their objectives reflect a set of values that transcend european borders and remain strikingly relevant : to promote the free movement of people, goods, services and capital, and to ensure equal access to essential materials. 1 almost 70 years later, these values are under strain. in my remarks today i will touch on some of the forces that risk pushing the global system towards fragmentation. i will also outline some high - level criteria for tackling the problem. the opening up to international trade, increased economic and financial integration, and closer cooperation between countries are important achievements for the international community after the devastation caused by the second world war. we must safeguard these achievements to ensure prosperity and peace for future generations. * * * * i wish to thank alessandro borin, michele mancini, valentina memoli, roberto piazza and pietro rizza for their valuable insights and contributions. article 52 of the eaec states that : ‘ the supply of ores, source materials, and special fissile materials shall be ensured [... ] by means of a common supply policy on the principle of equal access to sources of supply. ’ there is perhaps no better way to describe the process of global integration than through the lens of international trade. the ability to trade has always brought countries together. two centuries ago, the house of thomas jefferson, one of the american founding fathers, was filled with wine, furniture and books imported from europe. 2 since then, global trade integration has increased dramatically and its centre of gravity has shifted. two hundred years ago, trade was mostly an atlantic affair. 3 today, trade connects all regions across the world, and its value ( imports plus exports ) has reached 60 per cent of world gdp

some countries have been able to attract significant volumes of global production thanks to substantial public subsidies. 17 for example, the rapid growth of the electric vehicle industry in china has been supported by generous production subsidies. 18 multilateral rules and institutions have not always been effective in addressing these distortions. this has contributed to the erosion of the multilateral system. as a central banker, let me also comment on the state of the international financial system. at global level, the degree of financial integration remains high, and the financial safety net has expanded significantly since the 2008 financial crisis. however, this safety net remains uneven across countries. 19 there are signs that the landscape is changing. for instance, there is growing debate about the impact of trade and financial sanctions on the structure of the international payments system. in addition, some central banks are reducing their holdings of major currencies while increasing their gold reserves. 20 * * * how should we address the challenges of global fragmentation? recognizing that this is an extremely complex issue, i will refrain from offering a specific solution. instead, i will propose a methodological approach and outline some concrete examples of its application. d. rodrik, the globalization paradox : democracy and the future of the world economy, new york - london, w. w. norton, 2011. r. c. feenstra and g. h. hanson, ‘ the impact of outsourcing and high - technology capital on wages : estimates for the united states, 1979 - 1990 ’, quarterly journal of economics, 114, 3, 1999, pp. 907 - 940 ; r. c. feenstra and g. h. hanson, ‘ global production sharing and rising inequality : a survey of trade and wages ’, in e. k. choi and j. harrigan ( eds. ), handbook of international trade, oxford, blackwell publishing, 2003, pp. 146 - 185 ; ‘ fostering inclusive growth ’, document prepared by imf staff for the g20 meeting in hamburg on 7 - 8 july 2017. l. rotunno and m. ruta, ‘ trade spillovers of domestic subsidies ’, imf working papers, 41, 2024. european commission, ‘ eu imposes duties on unfairly subsidised electric vehicles from china while discussions on price undertakings continue ’, press release, 29 october 2024. the global financial safety net comprises central banks ’ fx reserves, central banks ’ bilateral swap arrangements ( bsas ), regional financing