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| José Manuel Durão Barroso (l), President of the European Commission and Mark Spelman, Chairman of Amcham EU and head of strategy at consultants Accenture, in Brussels on Feb 28, 2008. |
Globalization has benefited Europe and could boost annual household income by a further €5,000 per family within a few years, according to a study published on Thursday.
The study by the American Chamber of Commerce in the EU, says that companies in the European Union are better placed than US counterparts to benefit from a “ring of prosperity” on its borders from Russia through the Middle East to Africa.
While there have been winners and losers, EU exports, jobs and wages have expanded since 1990.
"The work of Daniel Hamilton and Joseph Quinlan on globalization and transatlantic relations is already compulsory reading for many entrepreneurs, politicians, journalists and academics. So it is a particular pleasure for me today to comment on their latest study before an audience of distinguished experts on globalization,"José Manuel Durão Barroso, President of the European Commission, who requested the report, said at the launch."It is also especially appropriate to do so under the auspices of AmCham EU, whose activities have contributed so much to strengthening relations between the European Union and the United States, whether through promotion of trade and transatlantic investment or as a vital link between the world of business and political decision-makers.
I am very happy to note that, using objective and quantifiable data, this study shows that confidence in the European Union's capacity to position itself in the world as a large, integrated and open area is fully justified."
Barroso said that there is a tendency to see the economics of globalization as a zero-sum game: more jobs in China would mean fewer jobs in Europe, for instance. "This study demonstrates that globalization can support better jobs in Europe and in China. According to this study, for every job that Europe has lost to economic change in the last two decades it has created at least one new one in more competitive parts of the economy. Offshoring accounted for less than 8% (200 000) of all jobs lost in Europe over the past four years. Over 70% of all European offshoring expenditure, in fact, occurs in Great Britain or Ireland. Also, notwithstanding all the talk about the rise of China and India and their ability to export, the EU’s share of world exports has actually increased this decade.
Countering preconceptions in this way is all the more important, as perceptions can be more important than reality in creating the right environment for change," he said.
“The point of this report was to demystify globalization,” said Mark Spelman, Chairman of Amcham EU and head of strategy at Accenture, the consultancy. “Europeans have reaped substantial and tangible benefits from globalization but there is scope to gain even more.”
Authors Daniel Hamilton and Joseph Quinlan from John Hopkins University found that several EU countries had adapted better than the US to the phenomenon.
Joseph Quinlan, a Wall Street banker, said: “If you look at the EU15 [richer countries that joined before 2004]…you find a ring of prosperity around them,” he said. Not only former communist countries that have now joined the EU but Russia and those in the Arab world and north Africa, boosted by high commodity prices, were becoming big customers.
EU 15 exports to the developing world quadrupled to $1,000 bn between 1990 and 2006. As a proportion of total exports they grew from 52% to 64% of EU exports.
“In essence the EU has its own China right next door. It is about Europeanisation as much as globalization,”Hamilton said.
Europe’s exports expanded by 11% on an annual basis in the first half of this decade.
The report says that Europe’s share of global manufactured exports rose to 47.1% in 2006, while Europe’s share of global imports has remained steady over the balance of this decade, accounting for 41.3% of world imports in 2000 and 42.1% in 2006.
While the process of enlargement has added more heft to Europe’s export capabilities, expanding trade ties with developing nations have contributed even more to Europe’s growing export clout. More of EU15 trade with non-EU members today is directed at or sourced from developing nations than developed nations. EU15 exports to developing nations surged from $262 billion in 1990 to just over $1 trillion in 2006, a four-fold increase. Developing nations accounted for nearly 64% of the EU15’s total exports in 2006, a dramatic rise from their 52% share in 1990. Conversely, the share of exports to the developed nations fell to 36% in 2006.
Europe’s periphery has emerged as a new and dynamic source of trade. EU exports to central Europe, Russia, the Middle East and Africa soared between 2000 and 2006:
Africa’s imports from the EU more than doubled; central, eastern European and Russian imports from the EU jumped by 174%; Middle East imports from the EU rose 116%. Demand for EU15 exports from Europe’s high-growth periphery is multiple times that from China. In essence, the EU has its own China right next door.
Developing Asia’s imports from the EU15 also doubled over the same period. While Japan ranks as the top supplier of goods to developing Asia, the EU15 rank second and the U.S. last among the top developed economies. Developing Asia’s imports from the EU15 totaled $266 billion in 2006, roughly a quarter more than imports from the U.S.
Between 2000 and 2006, EU15 exports to China (including Hong Kong) and developing Asia rose 231% and 102%, respectively.
The net effect has been a boost in real EU economic growth and in the earnings of many European companies, which in turn has helped to promote growth in employment and income among EU workers. For EU consumers, expanding trade linkages with developing nations has meant the availability of lower cost imports, which has helped to dampen inflation and raise net real incomes. However, particular industries, and workers in these industries, in Europe have suffered from rising imports from China and developing Asia.
Investment
Europe’s expanding investment ties with the rest of the world have resulted in similar benefits as trade. Since 1990, Europe has been a principal recipient and supplier of foreign direct investment (FDI), a process that has helped deepen Europe’s linkages with the rest of the world. Europe accounted for roughly 64% of global FDI outflows and for nearly 50% of global FDI inflows between 2000 and 2006.
