The European Union is lagging behind the USA and China. The European share of gross added value in global industry has fallen from 25 percent, which it was in the year 2000, to 16.3 percent in 2020. Furthermore, large European companies were 20 percent less profitable than American companies from 2014 to 2019. Their revenue grew about 40 percent slower during the same period, they spent about eight percent less on investments, and about 40 percent less on research and development compared to their counterparts across the pond.
Due to all of the above, the difference between GDP per capita in the USA and EU countries reaches up to 82 percent. This difference could deepen further, states the document Vision Paper, which represents an analysis of the competitiveness of the European industry, published by the association ERT (European Round Table for Industry), an institution representing around sixty large industrial companies in Europe. The latest publication from the ERT addresses, as previous ones, key European issues and recommendations from executives and chairs of some of the most significant European industrial and technological companies operating worldwide. However, in this latest document, the tone is significantly more alarming. The document states that the EU invests significantly less than other global economies in research and development. Additionally, over the last 15 years, there has been a significant difference in the economic growth rate between the EU and the USA as the “EU has maintained macroeconomically counterproductive austerity policies that have stifled new investments, while other economies have actively invested.” Therefore, the ERT suggests some solutions based on its own know-how, with the first concrete advice they offer to the European Commission administration being to launch a comprehensive program for shaping the single market in all political and economic areas, including energy, digital, capital, environment, and defense, as only the single market gives a greater chance to European industry.
Moreover, the ERT advocates that the Commission more proactively “forces EU member states to immediately remove illegal or unreasonable barriers” in the single market. Furthermore, the Commission should focus more on harmonizing and simplifying rules rather than constantly enacting new laws, which only “multiply and bring new burdensome regulations,” according to this European industrial think tank.
Countereffect of Decarbonization
The document also states that decarbonization is currently taking place in Europe, which, as emphasized by the ERT, is accelerating due to deindustrialization. Neither is economically sustainable nor acceptable for the climate, as certain industries relocate and deliver the same products back to the EU from greater distances, potentially even increasing the carbon footprint. At the same time, energy prices in the EU remain above pre-crisis levels and are higher than in other regions, primarily due to the increasing share of taxes and various fees – the document states that a sustainable future must not come at such a cost. Our recommendations are to reduce energy costs for companies in energy-intensive industries and to establish a unified European energy union with a common market, with harmonized permitting and tax systems, and a simple and stable regulatory framework to facilitate investments – states the document from European industrialists, which also notes that it is extremely important to upgrade energy infrastructure across the EU. What industrialists consider key is to strengthen alliances and trade agreements between the EU and other countries, especially the USA, Asia, and the Pacific. In the backdrop of war, ERT members live with the implications of many opposing legislative actions of the EU, while also grappling with the development of geopolitics in their operations in the USA, China, and elsewhere. Transitions happen, to borrow Ernest Hemingway’s phrase, gradually, and then suddenly. At some point, this period of change will end. The EU must seize this moment and focus on renewing growth and resilience. The fastest way to do this is to restore the dynamics of European integration. We hope that EU policymakers and national governments will heed our recommendations and that they will serve as a basis for further action – concludes this document.
