The impact of the euro on transatlantic relations

The impact of the euro on transatlantic relations

The impact of the euro on transatlantic relations

Written by Steven Everts, 07 January 2000

The spectre of tax harmonisation

The spectre of tax harmonisation

The spectre of tax harmonisation

Written by Kitty Ussher, 04 February 2000

The EU and world trade

The EU and world trade

The EU and world trade

Written by Richard Cunningham, Peter Lichtenbaum, Julie Wolf, 08 September 2000

The future of European stock markets

The future of European stock markets

The future of European stock markets

Written by Alasdair Murray, 04 May 2001

Breakfast meeting on 'The economic crisis'

Breakfast meeting on 'The economic crisis'

Breakfast meeting on 'The economic crisis'

27 November 2008

With Joaquin Almunia, European commissioner for economic and monetary affairs.

Location info

Brussels

Breakfast meeting on 'The future of EU financial services regulation'

Breakfast meeting on 'The future of EU financial services regulation'

Breakfast meeting on 'The future of EU financial services regulation'

25 November 2008

With David Wright, deputy director general, DG internal markets, European Commission.

Location info

London

Globalisation: Business versus politics?

Globalisation: Business versus politics?

Globalisation: Business versus politics?

Written by Katinka Barysch, 20 April 2007

Globalisation: business versus politics?
by Katinka Barysch

The CER and Accenture brought together a group of business people, journalists and policy analysts today, to discuss what the world may look like in 2020. What struck me is that there is not one debate about globalisation but several. And they hardly touch.

Business people and bankers tend to take globalisation as a given and ask how governments, businesses and workers can make the most of it. Journalists, think-tankers and politicians are more likely to ask whether globalisation is good or bad. The assumption is that it can be managed.

Two recent publications encapsulate these different approaches. Both extrapolate current trends and naturally conclude that China, India, Brazil, Russia and other emerging markets will be big global players in 2020. Mark Leonard (in his CER essay ‘Divided world: The struggle for supremacy’) then argues that the world will divide along two axis: democracy versus autocracy; and multilateral institutions versus power. Instability could result if the world’s leading states struggle to entice others into their camp.

Accenture’s report on ‘The rise of the multi-polar world’ takes a bottom-up approach. Technology, trade liberalisation and the growing reach of multinational enterprises draw emerging countries into our rules-based global market. This is a world characterised by growing flows of money, people and technology. Multinationals lure Indian programmers to Munich and Palo Alto; new R&D clusters are emerging in China; foreign direct investment last year exceeded $1 trillion.

Both visions are plausible. But are they compatible? Political differences – such as those predicted by Mark Leonard’s – have a tendency to disrupt the kind of economic interdependence that Accenture analyses.

In the scenario of a ‘divided world’, trade and investment could be tools for defending political objectives, and perhaps for spreading ideas. But countries will be less likely to employ economic sanctions to enforce their standards and values abroad. In a globalised world, cutting trade and investment ties simply creates opportunities for others. In its quest for raw materials, China has invested huge sums in African dictatorships shunned by the West. Many African countries now get as much FDI from emerging economies as from the developed world.

In Accenture’s visions, business itself could help to spread practices and underlying values. As Western multinationals move abroad, they bring with them not only money and management but also Western ideas on property rights, social protection and so on. But the flow is no longer one way. Today, 62 of the Fortune 500 companies are from the developing world, and the number is growing fast. Cross-border acquisitions help these companies to enter markets, acquire well-known brands and learn modern management. But the reversal of investment flows makes many Westerners uncomfortable. The debates about Dubai Ports, Aeroflot’s bid for Allitalia or Tata’s acquisition of Corus spring to mind. Russia now insists that European companies can only invest in its oil and gas sector if Gazprom is allowed to buy European downstream assets. Will such demands for ‘reciprocity’ spread? And if so, would the ‘new’ multinationals conform with our local rules or import their own ideas about how to do business or treat workers?

Market forces shape the globalised world, but so do governments. Autocratic countries find it easier to act strategically than democratic ones. If China was a democracy, its voters may well be upset about the costs (as well as the legitimacy) of the government’s Africa policy. Moreover, in democracies the losers from globalisation are making their voices heard. Low-skilled workers who watch imports and immigration erode their wages will vote for politicians promising relief. Protectionism and global leadership do not go together.

These are fascinating questions. There certainly is a need for business and politics to discuss their respective views of globalisation more often.

Katinka Barysch is chief economist at the Centre for European Reform

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Breakfast meeting on 'The impact of the economic crisis on the EU's climate policies'

Breakfast meeting on 'The impact of the economic crisis on the EU's climate poli

Breakfast meeting on 'The impact of the economic crisis on the EU's climate policies'

14 November 2008

With Richard Lambert, director general, CBI.

Location info

London

The future of EU competition policy

The future of EU competition policy

The future of EU competition policy

Written by Edward Bannerman, 01 February 2002

The future of the single market

The future of the single market

The future of the single market

Written by Katinka Barysch, 02 March 2007



The future of the single market
By Katinka Barysch

The EU puts out a lot of reports, studies, evaluations and announcements. So far this month, the Commission has released around 80 major documents. Many of them are too specialised, too long or simply too dull to attract wider interest.

One recent publication stands out. On February 21st, the economics team of the Commission’s ‘bureau of European policy advisors’ – now headed by Roger Liddle, previously an advisor to Tony Blair and Peter Mandelson – released a report on the future of the single market. Granted, advisors can speak more freely than bureaucrats. But the way this report is written shows how the EU should communicate.

* Accessible. The subject is complex, yet the document is easily understandable for non-economists. The authors steer clear of euro-speak and jargon. Moreover, while many EU documents are abstract, this one is full of examples. No waffle about “reaping the full benefits of the single market”. Instead, a list of examples: the single market allows you to go to hospital in other EU countries; it gives you the right to sue any company that sells faulty products; it has brought you low-cost air travel; it has reduced your mobile phone bill.

* Focus. This paper is about the single market. Period. It is not about social policy, the environment or the future of Europe. Absent is the EU’s unfortunate tendency to placate interest groups by lumping together too many issues. What the report does do is to look at how the context of European economic integration has changed, through globalisation, eastward enlargement and technological change.

* Realism. People tend to be cynical about official information and analysis. Achievements are overplayed, failures omitted. Liddle and his colleagues are honest. “The single market brought real benefits”, they say “but it has not led to a transformation of European economic performance.” Price convergence has stagnated, so has the share of intra-EU trade in total exports and imports. Only if problems are clearly identified can the search for solutions begin in earnest.

* Critical analysis. The intentions of the EU are usually good, but this does not guarantee optimal results. Yet the EU is notoriously bad at abolishing defunct laws and institutions. This report shows that single market legislation often embodies the interests of big companies. It risks becoming an impediment to innovation and competition from smaller rivals.

* Fresh thinking. Politicians and EU officials regularly call for the “completion of the single market”. Wrong, say Liddle and his colleagues. “The single market is an on-going process rather than an event.” It can never be “complete”. The initial rationale was to tear down trade and regulatory barriers to allow European manufacturing companies to reap economies of scale in a larger market. But future EU growth will not come from mass manufacturing. It will be driven by services, high-tech companies and start-ups. For them, removing remaining barriers or harmonising regulations won’t do. Instead, the single market needs to encourage innovation and research, facilitate venture capital and ensure competition.

* To-do list. Here, the bureau of European policy advisors does exactly what its name implies: it advises on policy. If the single market is to deliver benefits in the future, the EU and its governments need to: 1) prioritise and give up the notion that all barriers for doing business are equally important; 2) rely less on detailed directives and more on framework regulations that work in a fast-changing environment and take account of the administrative weaknesses of many new member-states; 3) adopt a sectoral approach that differentiates between the needs of say, the energy sector and healthcare; and 4) properly co-ordinate single market initiatives with policies on competition, trade, environment and so on.

The nature of this report should remind the entire Commission of one of its key roles: to provide independent, fresh and forward-looking analysis and policy ideas. But the European Commission’s own take on the future of the single market – published the same day as the bureau’s report – succumbs to some of the old failings of EU communication. Maybe it should be the advisors’ report rather than the Commission document that goes to EU leaders at their forthcoming spring summit and that forms the basis of the EU’s comprehensive single market review that comes out in the autumn of 2007.

The two reports in the future of the single market can be found on

http://ec.europa.eu/dgs/policy_advisers/publications/
docs/single_market_yesterday_and_tmorrow_en.pdf


http://ec.europa.eu/internal_market/strategy/
docs/com_2007_0060_en.pdf


Katinka Barysch is chief economist at the Centre for European Reform.

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