Dr Rebecca Harding, CEO Delta Economics and European Movement economic policy adviser ///
All the discussion of the European economy and the imminent collapse of the European project have focused on politics and finance.
In so doing, we take our eyes off the fact that Europe’s businesses are competitive globally, as evidenced through an analysis of trade data.
Of Europe’s top-ten export destinations, 8 are in Europe itself. A lot of our prosperity, and the success of European companies, depends on the fact that the Single Market, with a common set of rules, has made more trade between European nations possible.
Having a stable market at home, able to buy their projects, provides European companies with a firm base to compete globally.
Nearly 34% of world trade originates in Europe. This trade is worth around $US 5.5tn annually.
Europe’s largest export sector is cars. The world’s third largest export sector is cars. The value of European exports of cars is nearly 50% of the total value of exports of cars globally.
Europe’s second largest export sector is pharmaceuticals. The world’s fifth largest export sector is pharmaceuticals. The value of European exports of pharma is 70% of the value of pharma exports globally.
Europe’s fourth largest export sector is car parts. The world’s 7th largest export sector is car parts. The value of European exports of car parts is just over 47% of exports of car parts globally.
The value of European exports of aircraft and satellites is nearly 70% of the global value of aircraft and satellites.
The list goes on.
Part of the success story is the supply chains that originate in Europe and dominate world trade. Europe’s businesses are using the European Union’s common market as a means of creating an effective and low-cost supply chain, offering it a significant competitive advantage over their global competitors.
Which means that we should see Europe as a whole rather than individual countries. Take cars for example. Germany’s five largest export markets for cars are the UK, US, Italy, France, China.
The sources of Germany’s imports of cart parts are all European: Czech Republic, France, Italy, Poland, Austria, with the fastest growing being the Czech Republic (10%), Poland (14%), Hungary (12%), Slovakia (14%) and Romania (16%).
The connection is clear. A strong domestic supply chain in Europe feeds the extremely successful globally German car industry. This creates an economic spill-over effect, binding the European economy closer together.
There is a general assumption that advantageous exchange and interest rates have benefited only Germany – that it has been able to build its growth engine simply because its domestic borrowing costs are low and its exports comparatively cheap. Nay-sayers point to the strength of Germany as an export powerhouse for evidence. But trade in a globalised world is not a zero-sum game: Germany’s growth has had positive externalities in its European supply chain and countries like Ireland, the UK, Poland and the Czech Republic have shored up, or indeed enabled, their manufacturing growth as a result. It is not just in financial services where interdependencies make the case for holding the EU together. It is in trade as well.
Nigel Lawson said that the EU has changed since the UK joined and that the reasons for being part of it no longer exist. I would argue: EU trade has changed and the reasons for being part of it are stronger than ever. Completion of the single market in goods was supposed to be about economies of scale – the results are clear to see.
But now the reason for keeping the market tight is about supply chains.
Author : European Movement UK