As Trade Wars Hit Exports, Europe Turns Its Focus to Internal Growth

European companies and policy makers should fight for free trade but also focus more on internal growth as trade wars increasingly crimp exports.

That was the view of both Carl-Henric Svanberg, the Volvo chairman who also heads the European Roundtable of Industrialists, a coalition of Europe’s 54 largest companies, and Jean-Claude Trichet, the former European Central Bank president who now chairs the Brussels-based think tank Bruegel.

“We need to fight in the global trade wars and not let U.S. and China only do this,” Trichet said, speaking on a panel with Svanberg at the Fortune Global Forum in Paris on Tuesday. “We also need to protect our interests.”

Trichet noted that Europe was twice as dependent on trade for economic growth as the U.S. and so was much more vulnerable to being hurt by trade conflicts.

Over the past two years, U.S. President Donald Trump has initiated a series of protectionist measures, including withdrawing from global trade deals like the Trans-Pacific Partnership and raising tariffs and duties on both Chinese and European goods. In retaliation, these governments have imposed similar tariffs on some U.S. products. Those trade tensions have started to cause global trade flows to decline.

Svanberg said to compensate for the slowdown in global trade, European companies, which have often found growth through exports, should look more at markets within Europe itself. “The biggest companies in Europe have neglected to some extent our home market and we need to refocus on our home market,” he said.

Trichet also said that governments—particularly in countries like France and Italy, which have had persistently high unemployment—should continue to push structural reforms that can create more dynamic economies. “Structural reform is no longer a bad word in France,” he said.

Svanberg echoed this point, saying that providing inclusive economic growth was essential for diffusing the populist politics that has been on the rise globally and which has led to protectionism. He said Europe had to “deliver for the many” and that to do so, companies and countries needed to continue to work on competitiveness.

Sophie Bellon, the chairwoman of Sodexo, the global food services and facilities management company, who also spoke on the panel, said that while growth was important, European companies had an opportunity to lead on creating greater social equality and welfare.

She pointed to vegetable processing plants Sodexo has built in a poor neighborhoods, offering the local population jobs and training while also offering them more nutritious meals.

Bellon also said that while many companies feared the displacement new technology may cause—she noted Sodexo’s use of drones to deliver goods and perform dangerous jobs like inspecting warehouse roofs—she doubted most service roles would be replaced by automation.