Europe is struggling to find its place in the new global economy
because of 'domestic' issues, not external factors (like a rising
China or trade disadvantages). On the contrary, the external climate
favors European growth - if Europe can improve competitiveness and
find its niche.
Editor's note:This is the second of two articles based on Pascal
Lamy's recent talk to the Paris-based Notre Europe think tank, of
which Mr. Lamy is the honorary president. Yesterday: "World must
change the way it measures trade flows"
To explore the prospects for Europe in a global economy in the
grip of change and development, we first have to put to bed two
cliches that too often foul the debate and prevent it from making
The first cliche argues that Europe is a victim of the new
international division of labor. All the available figures show us
that that view is mistaken. In the change in production methods that
we have witnessed over the past 20 years and more, Europe is coming
out of things far better than either the United States or Japan.
Europe's market share of international trade has remained more or
less stable throughout this period, hovering around the 20 percent
mark, while the US and Japanese market shares have shrunk
substantively. The European Union's foreign trade surplus in the
industrial sphere has trebled over 10 years, hitting somewhere in
the region of 200 billion euro.
But as we have seen, that same period has witnessed major
progress on the part of the emerging countries, with China heading
the list. The countries of Europe, Germany in particular, are
especially well placed to benefit from their comparative advantages
at a time when the emerging countries have to import considerable
quantities of manufacturing technologies and goods. So we can hardly
call Europe a victim; indeed, so far it has rather profited from the
The second cliche: Europe is naive in that it allows itself to be
taken advantage of and overtaken by its trading partners, and the
porous nature of its borders is said to be the most obvious
demonstration of this state of mind.
In point of fact, these statements cannot withstand even the most
modest analysis of the facts and figures. Europe's borders are
neither more nor less porous than those of comparable developed
countries. This applies to traditional trade barriers, customs duty
and quotas, but also to such commercial protection measures as anti-
dumping rules and countervailing duties, or to technical quality,
food safety, and environmental safeguard standards.
Europe is no more naive than its trading partners that enjoy a
comparable level of development.
Europe's problem - its weak growth and crippling unemployment -
are thus not simply linked to international trade but to different
factors, and thus we should not be seeking solutions to that problem
in a fallback commercial policy built on increasing the number of
obstacles to trade.
The prices of European products have tended to become
increasingly less competitive over the past few years. Salary levels
are sometimes mentioned as being one of the causes for this, but
there is absolutely no point in comparing hourly wages without
relating them to the productivity of the working hour.
Where competitiveness is concerned, the fact that a European
worker earns far more than his Chinese counterpart is of little
consequence so long as that higher hourly wage level is reflected in
greater efficiency and greater productivity. Thus when we look at
salaries, we have to set them against worker productivity.
Having said that, it is glaringly obvious that Europe's hourly
productivity is currently being eroded, particularly compared with
the US. The euro's high rate of exchange against the dollar in
recent years has also had a far from negligible impact on European
products' loss of competitiveness in the world's marketplaces. …