the return of protectionism policymakers in many countries are increasingly concerned at the smooth functioning and security of global supply chains. the covid - 19 pandemic and heightened geopolitical tensions following russia's war on ukraine and its people have exacerbated these issues. the imposition of sanctions on russia by a number of countries suggests that a more fragmented international system could replace previous norms of ever more open markets and increasing interconnectedness. in particular, strategic geopolitical rivalries may decrease the weight that policymakers place on economic gains from global integration. this dynamic, along with factors such as natural disasters, climate change - induced volatility and terrorism mean that supply chain disruptions could be a new normal. such disruptions have fostered a narrative that countries and regions could be better off by reducing their exposure to foreign shocks, which propagate into their economies through integration into global value chains. there is a renewed focus on the efficiency - resilience trade - offs inherent in international trade. that is, whether the gains from lower - cost imports adequately compensate for greater susceptibility to shocks transmitted across borders. i have previously highlighted that resilient systems are in the interest of the community as a whole, and particularly during a time of disruptive change. our ability to respond to the pandemic was a clear illustration of the benefits of building - up stocks of resilience. in order to increase security of supply and reduce “ excessive dependencies ”, the eu has recently enacted legislation to spur the local production of key manufacturing inputs. these initiatives seek to help europe achieve open strategic autonomy, or the ability to protect its interests and adopt its preferred economic, defence and foreign policy without depending heavily on other foreign states. this is a stated policy objective of the european commission. similar legislation is being enacted around the world, such as the inflation reduction act in the us. these legislative initiatives underscore the shift towards an emphasis to reduce exposure to global supply chains including through the greater use of domestic inputs, the shortening of value chains and through the further diversification of input sources. the potential effects of global fragmentation the imf and other international institutions are warning that there are potentially considerable negative effects from a fragmentation of global trade along geopolitical lines. in an early study, the oecd estimate that greater localisation increases vulnerability to both external and domestic shocks. this is contrary to proponents of localisation, who believe that any increase in suscept

– certainly ambitious, but realistic all the same - have formed the basis for successive governments ’ budget plans. these recommendations go even further than strict respect for eu rules, since they take into account future requirements stemming from the ageing population. moreover, the high council of finance, which also comprises experts appointed by the communities and regions, contributes to ensuring the necessary coordination between the various levels of power that make up the country ’ s system of government. it effectively transposes the general objectives for all the public authorities into specific recommendations for each entity. these are given a formal setting in cooperation agreements between the federal government and the communities and regions, a sort of internal stability pact. we could look at it as an example of good practice. besides, the beneficial role of the nai and the high council of finance in preparing the ground for consolidation of public finances is acknowledged in recent imf and ec publications. 2. unlike the budgetary procedures, the automatic wage - indexation mechanism used in belgium meets with almost unanimous disapproval by the international institutions, because of the nominal rigidities it risks causing. along with luxembourg, belgium is certainly in good company here, but we are quite isolated among the european countries, even if several of them have partial indexation systems. are belgium and luxembourg right to go it alone or not? in my view, in the belgian case the question calls for a carefully weighed - up response. the wage - indexation mechanism has been around for a long time in belgium. the first collective agreements on the subject were concluded as early as 1920, notably in the mining industry, and, after a wage freeze during the second world war, they were widely reinstated at the end of it. the wage - indexation mechanism has become an essential element of a wide social consensus, but at one time, it also risked undermining business competitiveness. index - linking was also temporarily suspended following the devaluation of the belgian franc in 1982. the need to keep a competitive edge led to a thorough reform in 1994. the government laid down a new requirement for the so - called health index to be used as a reference for indexation rather than the general consumer price index. a number of products like tobacco, alcoholic drinks, petrol and diesel are not taken into account in calculating the health index. in this way, any increase in taxes and excise duties on these products, especially tobacco and petrol, is no longer passed onto wages and prices and, on the other hand, second