Summer School Europe Inside Out

Transcription

1 Summer School Europe Inside Out EU External Trade Policy in Times of Regional Trade Agreements Prof. Dr. Jan Van Hove KU Leuven and INFER 1

2 Structure Europe s Recent Trade Performance in a Global Perspective EU External Trade Policy as motor behind globalization Implications for the Future 2

3 EU External Trade Policy in Times of Regional Trade Agreements EUROPE S RECENT TRADE PERFORMANCE IN A GLOBAL PERSPECTIVE 3

4 Evolution in world exports, production and GDP, (level 1950=100) Exports Production GDP

5 Evolutions in World Trade Trade is an important phenomenon and a crucial reflection of globalization World trade boosted, in particular in recent decades thanks to many driving forces Policy = liberalisation of world trade Transportation: reduced costs, new technologies (including e.g. ICT) Entrepreneurship New players (e.g., emerging countries, multinationals ) New products, innovation etc. The global financial crisis of caused a major disruption in global trade. 5

6 Total World Exports (billion USD), (source: WTO (2013))

7 15.0 Annual growth in World Exports and World GDP (source: WTO, 2014) Exports GDP

8 Crisis and Global Trade Historical disruption due to the global crisis : sharp decline in world trade BUT: equally surprisingly fast recovery! Causes of the crisis (cfr. literature): Changes in world demand Reductions in capital expenditures Restrictions in trade finance Vertical specialisation and internationalisation of production 8

9 Crisis and Global Trade Given the spectacular recovery, should we decide that world trade is again what it used to be? Well actually it is not! 9

10 The Crisis and Exports by Region Level in 2005Q1=100 Source: WTO (2012) 10

11 Regions shares in global exports (source: WTO, 2014) North America South and Central America Europe CIS Africa Middle East Asia 11

12 The Crisis and Imports by Region Level in 2005Q1=100 Source: WTO (2012) 12

13 Watching Europe (1) Share of each region in total world exports Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 North America South and Central America Europe CIS Asia Other countries Declining position of Europe versus Fast rise of emerging economies, in particular Asia 13

14 Watching Europe (2) Evolution in total EU trade + evolution in intra-eu27 and extra- EU27 trade Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 Total EU27 export Intra-EU27 export Extra-EU27 export 1. Intra-EU trade is very important for EU! 2. Similar crisis-effect on intra-eu and extra-eu trade, although extra- EU trade shows better recovery! 14

15 Watching Europe (3) Evolution in the percentage of intra- EU27 and extra EU27 exports in total EU27 exports Intra-EU27 export Extra-EU27 export Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 Gradual, but clear tendency that extra- EU exports become more important 15

16 Watching Europe (4) Evolution in percentage of intra-eu27 and extra-eu27 imports in total EU27 imports Intra-EU27 import Extra-EU27 import Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 Analogous to exports: gradual, but clear tendency that extra-eu imports become more important 16

17 Europe in Global Trade World trade used to be dominated by western countries, but gradually emerging markets are taking over. The global crisis seems to reshape global trade pattern: winners and losers! The crisis strengthens, rather than causes, this pattern. In particular, the share of Europe in world trade is declining, making the non-eu markets increasingly crucial for EU exporters and importers. Nevertheless, for now, the EU internal market remains the main market for EU traders. and EU remains a very important trader in the world economy! 17

18 Global trade network (2012, billion USD, source: WTO, 2014) Origin Destination World North America South and Central America Europe CIS Africa Middle East World North America South and Central America Europe CIS Africa Middle East Asia Asia 18

19 TOP 10 Exporters of the World (2012, % in total world export, source: WTO (2014))

20 TOP 10 Importers of the World (2012, % in total world imports, source: WTO (2014))

21 TOP 3 Exporters en Importers (EU as a whole, only extra-eu, 2012, source: WTO, 2014)) IMPORT Extra-EU (27) China United States EXPORT United States Extra-EU (27) China 21

22 Geographical Orientation of EU Trade What are the main EU trading partners? (outside EU) 22

23 20 TOP-15 EU Export Partners (2014, % of total EU exports, Eurostat (2015)) Transatlantic exports remain dominant! Neighbouring countries are important trading partners. 8 6 Emerging economies become important destination markets

24 18 TOP-15 EU Import Partners 16 (2014, % of total EU imports, Eurostat (2015)) Emerging markets become really main import partners. US and neighbours are much less important. Imports strongly driven by energy

25 Trade Balance Is the EU trade balance in equilibrium? And did the crisis affect the EU trade balance? 25

26 Evolution in EU28 Trade Balance (billions euro, Eurostat (2015)) Total EU Trade Balance (Goods & Services) Total EU Trade Balance (Goods) Total EU Trade Balance (Services) 26

27 EU Trade Balance: Main Findings EU trade balance shows a clear deficit, but recently recovery. Deficit was reduced during and after the global crisis. Deficit is caused by trade in goods and compensated by trade in services. Mainly driven by energy imports (and global energy prices) No problematic deficit! 27

28 Trade Balance EU27 Member States (mio euro, Eurostat (2012)) United Kingdom Spain Greece Poland Austria Cyprus Bulgaria Latvia Estonia Slovakia Czech Republic Belgium Ireland Germany

29 Evolution in Current Account Balance (% of GDP, source IMF) Total EU trade balance is only slightly negative. Hence trade deficit with some Asian countries, in particular with China, can easily be absorbed (<-> USA!). Note: within Asia, especially India has a substantial trade deficit. Hence: crisis contributed to a restoration of global trade balances EU27 USA China India Japan South Korea 29

30 Sectoral Specialization What are the main sectors of EU exports and imports? Any crisis effect? 30

31 Composition of EU Trade in Goods (2012, mio euro source: Eurostat, 2014) Lack of endowments (raw materials and energy) cause a trade deficit in the corresponding sectors almost completely compensated by trade surpluses in other sectors. Jan Van Hove (2014) - The European Business Context Exports Imports Balance 31

32 Main Sectors Industrial exports and imports remain very important Energy imports are very substantial. Same import as export sectors are important Hence: substantial degree of intra-industry trade and hence (horizontal and vertical) diversification in traded goods. Hence: substantial and increasing degree of competition in many sectors and products 32

33 Sectoral EU Export Performance Concept of revealed comparative advantage (RCA) Values larger than 1 indicate an advantage Values smaller than 1 indicate a disadvantage Focus on the period to look for crisis effects (European Competitiveness Report) EU performance relative to the world 33

34 EU RCAs (source: European Competitiveness Report, 2012) Manufacture of food products Manufacture of beverages Manufacture of tobacco products Manufacture of textiles Manufacture of wearing apparel Manufacture of leather and related products Manufacture of wood and of products of wood and cork, except furni-ture; manufacture of articles of straw and plaiting materials Manufacture of paper and paper products Printing and reproduction of recorded media Manufacture of coke and refined petroleum products

35 EU RCAs (source: European Competitiveness Report, 2012) Manufacture of chemicals and chemical products Manufacture of basic pharmaceutical products and pharmaceutical preparations Manufacture of rubber and plastic products Manufacture of other non-metallic mineral products Manufacture of basic metals Manufacture of fabricated metal products, except machinery and equipment Manufacture of computer, electronic and optical products Manufacture of electrical equipment Manufacture of machinery and equipment n.e.c Manufacture of motor vehicles, trailers and semitrailers Manufacture of other transport equipment Manufacture of furniture Other manufacturing

36 EU Export Performance by Sector Clearly the EU has a comparative advantage in: Paper and printing/ reproduction industries Food-beverage-tobacco (cfr. cultural goods ) Wood industry Chemicals and in particular pharmaceuticals Cars Some metal products Some machinery Crisis did not fundamentally alter the EU s revealed comparative advantages only some minor changes in 2009 (up and down)! 36

37 EU Export Performance by Sector Clearly the EU has a comparative disadvantage in: Textiles Leather Petroleum products Basic metals Basic machinery These patterns are in line with the theoretical predictions: EU has a comparative advantage in capital- and knowledge-intensive sectors. It has a comparative disadvantage in labour-intensive sectors. However: a lot of intra-industry trade! Hides differences across EU member states! 37

38 Growth in intra-eu exports, (year 2001=100, source: Eurostat, 2014) Belgium Bulgaria Czech Republic Denmark Germany Estonia Ireland Greece Spain France Italy Cyprus Latvia Lithuania Luxembourg Hungary Malta Netherlands Austria Poland Portugal Romania Slovenia Slovakia Finland Sweden United Kingdom 38

39 Slovakia Lithuania Latvia Bulgaria Poland Romania Czech Republic Cyprus Estonia Slovenia Hungary Netherlands Germany Sweden Austria Spain Greece Portugal Belgium Denmark Italy Luxembourg Malta France Finland United Kingdom Ireland Level of intra-eu exports in 2012 relative to 2001 (=100)

40 Growth in intra-eu exports, (year 2001=100, source: Eurostat, 2014) Selection of Countries Germany Ireland Greece Spain France Italy Portugal Romania United Kingdom

41 Growth in extra-eu exports, (year 2001=100, source: Eurostat, 2014) Belgium Bulgaria Czech Republic Denmark Germany Estonia Ireland Greece Spain France Italy Cyprus Latvia Lithuania Luxembourg Hungary Malta Netherlands Austria Poland Portugal Romania Slovenia Slovakia Finland Sweden United Kingdom 41

42 Latvia Slovakia Lithuania Estonia Czech Republic Poland Romania Bulgaria Hungary Greece Portugal Slovenia Netherlands Spain Cyprus Luxembourg Belgium Malta Germany Austria Denmark Italy Sweden United Kingdom France Finland Ireland Level of extra-eu exports in 2012 relative to 2001 (=100)

43 Growth in extra-eu exports, (year 2001=100, source: Eurostat, 2014) Selection of Countries Germany Ireland Greece Spain France Italy Portugal Romania United Kingdom 43

44 Comparing EU member states Similar pattern in intra-eu and extra-eu trade performance, extra- EU trade has increased more. Similar crisis effect on all EU member states. Substantial variation in trade performance of EU member states Most striking: Strong export performance in new EU member states, both intra-eu and extra-eu, in new EU member states: 1) catching-up process cfr. integration in the EU economy 2) but also strong export performance in European as well as global markets = renewed competitiveness! 3) Focus on EU market remains strong. 44

45 Comparing EU member states Diversity among crisis countries (PIGS, PIIGS) Ireland (export platform economy) shows weak export growth performance. Greece and Portugal do remarkably well. Spain does better than Italy. Some large economies, in particular France, UK, Italy do not perform very well in terms of export growth. Role of deindustrialisation and lack of competitiveness. Also Finland does not perform well cfr. general problems in the Finnish economy. Export performance strongly related to economic growth performance. 45

46 Relationship between Economic Growth and Export Growth Performances in EU27 Export Performance (growth between 2001 and 2012, level 2001 = 100) (2012 vs. 2001) Change in Convergence to EU Average (% Change in GDP per capita (PPS) level compared to EU28 average, 2012 versus 2001) 46

47 EU External Trade Policy in Times of Regional Trade Agreements EU EXTERNAL TRADE POLICY AS MOTOR BEHIND GLOBALIZATION 47

48 EU External Trade Policy Important steps in EU external trade policy: 1968: establishment of the European Customs Union Free trade among European Economic Community member states: formal barriers to trade disappear Common external trade policy, i.e. policy towards non-ecc countries 1986: European Single Act Establishment European Single Market (gradual) removal of technical barriers to trade: major accomplishment, but still an ongoing job! Liberalisation of services provision (and trade) 48

49 EU External Trade Policy Institutional responsibilities: European Commission European Commissioner for external trade (currently: Cecilia Malmström ) Directorate-General for Trade (DG Trade) Strong interaction with the member states (cfr. national interests) Increased role for European Parliament since the Treaty of Lisbon EU External Trade Policy in practice: Decisions about use of trade policy instruments But more importantly: international negotiations on (multilateral and bilateral) trade agreements: aiming at better market access for EU firms in non-eu markets! 49

50 Main Principles of EU Trade Policy EU = member of the World Trade Organisation (WTO) Forum to discuss multilateral trade liberalisation Based on principles of Most Favourite Nation Equal (national) Treatment European Commission responsible for EU trade policy (EU customs union since 1968) However: more recently, clear shift to regionalism Due to slow progress/ failure of the WTO negotiations in the latest Doha Development Round Due to worldwide popularity of regional trade agreements 50

51 Main Principles of EU Trade Policy Reflection of preferences by EU member states Balanced trade policy, a compromise Regional trade agreements (including the EU!!!) allowed by the WTO under art. 24 of the GATT Why? Building blocks for multilateral trade (vs. stumbling blocks ) EU external trade policy more offensive than defensive : more oriented towards promoting exports than towards limiting imports. Picture of Fortress Europe only holds for agriculture, and even then Key objective: MARKET ACCESS FOR EU FIRMS 51

52 Main Principles of EU Trade Policy Hence EU external trade policy NOT about protecting the EU economy ( protectionism except for agriculture and a few exceptions) MAINLY about improving market access for EU firms and products on global markets Reducing formal barriers to trade Reducing informal barriers to trade too! 52

53 Main Principles of EU Trade Policy Active use of trade defence instruments Anti-dumping, anti-subsidies and safeguards Makes trade policy relatively sophisticated Especially directed towards Asia (and mainly China!) Asian countries are becoming users of these instruments too! Some recent cases: E.g. solar panels, agglomerated stone with China E.g. glass fibres with India and Indonesia E.g. steel fasteners with China and Malaysia -> Main affected sectors: chemicals, textiles, iron and steel 53

54 How important are Tariffs in actual Trade Policy? Tariffs decreased worldwide = result of WTO! But: Still the main trade policy instrument (cfr. tariffication policy of the WTO) Fundamental instrument in many other trade policies too (e.g., trade defence) Still very relevant in some sectors, in particular agriculture Example: EU external trade policy 54

55 Summary EU Tariffs (source: WTO, 2014) Summary Total Ag Non-Ag WTO member since 1995 Simple average final bound Binding coverage: Total 100 Simple average MFN applied Non-Ag Trade weighted average Ag: Tariff quotas (in %) 11.3 Imports in billion US$ , ,040.8 Ag: Special safeguards (in % )

56 EU Tariffs by Sector (source: WTO, 2014) 40.0 Average Applied MFN Tariff (2012), in %

57 EU Max. applied MFN Tariffs by Sector (%, source: WTO, 2014)

58 Summary Tariffs EU faces on Exports (2012, %, source: WTO, 2014) Agricultural products Simple Average MFN Tariff Weighted Average MFN Tariff 1. United States Russian Federation Japan Switzerland China Non-Agricultural products Simple Average MFN Tariff Weighted Average MFN Tariff 1. United States China Switzerland Russian Federation Turkey

59 Most Recent EU Trade Policy: Trade Defence Defending EU firms against unfair practises by foreign firms/governments Within the WTO framework EU = active player, especially against emerging countries In terms of trade and welfare effects: very similar to tariffs 59

60 Number of New Investigations and Reviews regarding Anti- Dumping and Anti-Subsidy by EU Commission (EC (2013)) New Investigations Reviews

61 Argentina Belarus Bosnia and Herzegovina Brazil China India Indonesia Iran Kazakhstan Korea FYROM Malaysia Oman Pakistan Russia Saudi Arabia Taiwan Thailand Turkey Ukraine U.A.E USA TOTAL New Anti-dumping and Anti-Subsidy Investigations initiated by the EU by Country of Export (EC (2013)) 61

62 Main Principles of EU Trade Policy Strong focus on regional trade agreements Lack of progress in multilateral negotiations Easier to control than multilateral trade talks More flexible in terms of topics More strategic in terms of gradual liberalisation, exceptions etc. Strong focus on large and emerging economies: US and large emerging countries: agreements with South Korea, Singapore, Canada (CETA), negotiations with USA (TTIP), Japan, India, Malaysia, Thailand, Vietnam etc. = reflects the fact that main partners and emerging countries are a top priority for the EU = creates new trade opportunities for the future Similar RTA-trend in many other countries! 62

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64 EU Regional Trade Agreements Strong trade creation effects are expected from Transatlantic Trade and Investment Partnership (TTIP) = a comprehensive agreement between the EU and the US on trade and investments More than just a trade agreement! Dealing with liberalisation of trade in services and, often related to that, regulatory barriers to trade will be challenging 64

65 EU Regional Trade Agreements Classical regional trade agreement (RTA) Focus on free trade, i.e. reducing formal barriers to trade, in particular tariffs Recent EU RTAs: increasingly focus on: Informal barriers to trade, e.g. Country of origin rules Fair competition for European business on foreign markets Trade-related issues, e.g. Intellectual property protection Environmental protection In two directions!!! -> so stimulates both exports and imports for the EU 65

66 Overview of EU RTAs (1) source: DG Trade (2016) Faroe Islands - 01 January 1997 Norway - 01 July 1973 Iceland - 01 April 1973 Switzerland - 01 January 1973 The former Yugoslav Republic of Macedonia - Stabilisation and Association Agreement, 01 May 2004 Croatia - Stabilisation and Association Agreement, 01 February 2005 Albania - Stabilisation and Association Agreement, 01 April 2009 Montenegro - Stabilisation and Association Agreement, 01 May 2010 Bosnia and Herzegovina - Interim Agreement on trade and trade related matters, 01 July 2008 Serbia - Interim Agreement on trade and trade related matters, 01 February 2010 Algeria - Association Agreement, 01 September 2005 Egypt - Association Agreement, 01 June 2004 Israel - Association Agreement, 01 June 2000 Jordan - Association Agreement, 01 May 2002 Lebanon - Interim Agreement, 01 March 2003 Morocco - Association Agreement, 01 March

67 Overview of EU RTAs (2) source: DG Trade (2016) Palestinian Authority - Association Agreement, 01 July 1997 Syria - Co-operation Agreement, 01 July 1977 Tunisia - Association Agreement, 01 March 1998 Chile - Association Agreement and Additional Protocol, 01 February 2003 (trade) / 01 March 2005 (full agreement) Mexico - Economic Partnership, Political Coordination and Cooperation Agreement, 01 July 2000 South Africa - Trade, Development and Co-operation Agreement, 01 January 2000 CARIFORUM States - Economic Partnership Agreement, Provisionally applied Ivory Coast - Interim Economic Partnership Agreement, Pending Cameroon - Interim Economic Partnership Agreement, Pending Korea - New Generation Free Trade Agreement, signed 06 October 2010 Papua New Guinea and Fiji Interim Partnership Agreement, May 2011 Iraq Partnership and Cooperation Agreement, signed on 11 May 2012 Central America - Association Agreement, signed 29 June 2012 Peru - Colombia - Free Trade Agreement, signed 26 July 2012 Canada- EU (2014) Customs Unions with Andorra (1991), Turkey (1995) and San Marino (1992) 67

68 Debate on TTIP (and other Trade Agreements) 68

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76 Bilateral Trade Agremeents: to be or not to be? ADVANTAGES Deep, fast and efficient way of trade liberalisation with a specific partner Potentially substantial trade creation effects Ad hoc approach and flexibility Dynamic effects (e.g., strong link with investments, innovation, ) DISADVANTAGES Strong trade diversion, hurting other trade partners (vs. multilateral trade liberalisation) -> discriminatory and inefficienty way of liberalisation Complex and non-transparent web of agreements -> longterm consequences? Potentially unequal effects on the import and export side -> ambiguous welfare effects 76

77 TTIP: why so sensitive? Familiarity with the partner New type of trade agreement -> future template in US-EU trade negotiations Touches upon long-standing issues (e.g., in food sector, different approaches in chemical and pharma sector) Strong competitors Both strong economies with global political power Some proposals are (too) far-reaching 77

78 TTIP: why yes? SOCIO-ECONOMIC ARGUMENTS Very important bilateral trade relation A relatively small liberalisation will have large absolute effects PLUS: liberalisation in other sectors, notably services = argument within the traditional approach of trade liberalisation Flexibility w.r.t. topics and timing Going beyond traditional trade liberalisation Gradual approah can soften consequences Positive welfare effects (?) 78

79 Impact Assessment of RTAs Many people interested in the impact of RTAs (policy makers, companies, trade unions, employees, customers, researchers, etc.) Hard to measure the impact of RTAs 2 Methodologies stand out: Ex ante analysis: based on simulation in a general equiilbrium model Ex post analysis: based on analysing differences in RTAtrade and non-rta-trade in a partial equilibrium model 79

80 TTIP: why yes? STRATEGIC ARGUMENTS Global context: Lack or progress in the World Trade Organisation Rise and performance of new players in the world economy Idea of global standards is attractive Global = US-EU standard in the TTIP thinking = argument within new trade liberalisation 80

81 Economics of Regulatory Differences Home Market Bias Regulatory Differences Adaptation Costs for Producers Higher Price, Less Choice or Late Availability for Consumers Unfair playing field for Companies Less Trade or Investment Price Differentiation Inefficiencies maintained 81

82 Evidence of Transatlantic Regulatory Differences Differences in regulations as well as in regulation philosophy EU regulatory hunger versus market-oriented approach in Anglo-Saxion countries Regulations as instrument of strategic trade policy Some regulatory differences are merely red tape! 82

83 Regulatory Cooperation Various kinds of regulatory cooperation possible NO cooperation, but ACCEPTANCE of differences = mutual recognition Full harmonization common regulations (new or existing ones) Partial harmonization: agreement to differ on some aspects Cfr. process of building the EU internal market 83

84 Regulatory Cooperation Economic Perspective: Adaptation Cost Perspective: full harmonization is the best option General Welfare Perspective: it depends Evaluation of trade-off between fundamental aims of regulation and its potentially devastating impact on trade = long and hard process at detailed levels! 84

85 Some Conclusions on the TTIP Debate Hard to predict the (exact) impact of TTIP Because ex-ante simulations are not always reliable (and very sensitive to the assumptions made) Because exact content of TTIP is unknown Regulatory liberalisation has clear advantages, but full liberalisation would violate different preferences and traditions in the EU and the US Regulatory liberalisation can take many forms, going from mutual recognition till full harmonization. 85

86 Some Conclusions on the TTIP Debate Objections against regulatory cooperation/liberalisation shouldn t determine the final judgement of TTIP. TTIP is about more than regulations. Tariff liberalisation and reducing red tape is still very useful! TTIP should be a framework agreement rather than a very precise agreement. Fast trade & investment deal = bad trade & investment deal! Reconciling trade facilitation and other welfare goals takes time! 86

87 EU External Trade Policy in Times of Regional Trade Agreements IMPLICATIONS FOR THE FUTURE 87

88 Some Conclusions and Discussion Europe s absolute trade performance is very strong, but Europe s relative position in the world is deteriorating. The crisis accelerated that trend. Emerging markets are becoming relatively more important. Global markets are increasingly important for EU companies. Cfr. top priority in EU trade policy: market access! -> extra-eu exports are increasing, absolutely as well as relatively. From European business to Global business: substantial part of emerging markets exports are driven by western multinationals. 88

89 Some Conclusions and Discussion Most EU countries recovered rather well from the crisis, even countries severely hit by the crisis. However: substantial differences in export growth performance Strong catching-up in Central and Eastern Europe, for exports as well as imports. Especially strong performance within the EU Will these countries be able to translate that success into more global business? Crisis did not fundamentally change Europe s comparative advantages and disadvantages. Hence the specialization pattern was not affected by the crisis. 89

90 Some Conclusions and Discussion The old Europe is searching for a new position in a changed global context. Defensive strategy: relying on its traditional competitive advantages Offensive strategy: preparing the EU economy for the future Recent evolutions in Europe s performance in a global business context point to substantial and many challenges. Coping with new players Defending existing products or developing new ones? (role of technology and innovation) More active policy stance required? 90

91 Some Conclusions and Discussion EU has a tradition of trade openness (active role in World Trade Organisation, active negotiators of bilateral trade and investment deals ) will trade openness save Europe s future? Fear for globalization At least, globalization will lead to structural shifts in the EU economy with consequences for jobs, welfare, company structures, production dynamics, location reallocations, dynamic specializations etc. 91