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US business is a partner of EU competitiveness
Mario Draghi’s report on the future of European competitiveness provides an important contribution to the ongoing debate across the continent. It outlines critical avenues to build a stronger EU economy, one that is equipped to face a challenging external environment as well as support the prosperity and security of citizens. The report highlights Europe’s competitiveness gap, which is rooted in well-known challenges including overregulation, a risk-averse approach to innovation and high energy costs. It is evidenced by sobering economic data, such as the growing GDP and productivity gap between the US and EU, and a new forecast by the European Central Bank of weak growth across the eurozone economy.
This report is yet another reminder that urgent action is required. Addressing this competitiveness gap must now shift from being top of the political debate to being at the heart of the EU policy agenda. European policymakers must turn the recommendations into tangible actions. Concerted action from EU institutions and Member States is needed and should capitalise on the alignment in the EU strategic agenda.
Making Europe more competitive does not require the region to turn its back on its long-standing commitment to openness. The American Chamber of Commerce to the EU (AmCham EU) cautions against certain recommendations in the report that would unfairly discriminate against non-European companies. American companies are woven into the fabric of the EU economy, committed to building on their legacy of strengthening the region’s Single Market and industrial base. This is clear from the €3.5 trillion of US foreign direct investment located in Europe. In particular, while AmCham EU fully supports the call to strengthen the European Defence and Industrial base, a reinforced European preference principle and substantive incentive mechanisms to prioritise European defence solutions over non-EU solutions would not address European security needs in the near term.
As the Draghi report is analysed and debated, we call on policymakers to focus on those recommendations that are critical to making a positive case for business investment in the EU.
- Europe needs to rethink its approach to regulation, because a more favourable and simplified regulatory ecosystem for all innovative companies would do much to address the impact of EU’s current regulatory burden. For example, scattered and fragmented regulations across the EU are major obstacles to the creation of a true and well-functioning Single Market. Policymakers should look to industry ideas on regulatory reform such as AmCham EU’s Competitiveness Scorecard as a tool to measure EU performance and inform proposals for EU-wide instruments for policy coordination.
- Europe’s barriers to scaling up financing for business must be tackled. For example, proposals to develop a better financing environment for disruptive innovation, start-ups and scale-ups must be urgently actioned. Completing the Banking Union would significantly increase the financing capacity of the banking sector. The EU should also strengthen its foreign direct investment screening mechanism by overcoming fragmentation between national screening systems. Political buy-in across Member States will be essential on finance policy, particularly for any joint financing efforts to be successful.
- European competition policy could be improved by revising the existing merger control framework to promote harmonisation between national regimes, further refine procedures and align transaction screening processes. Innovation plays an important role in competition, but changes to competition assessments should be designed in a way that does not create barriers or uncertainties for foreign investors.
- Prioritising Europe’s strategic international partnerships is key to enabling competitiveness. For example, the EU should diversify supply sources of critical resources through new trade agreements and partnerships with reliable global suppliers, increase circular economy investment, increase public-private partnerships and support research and innovation for alternative materials and technologies. These kinds of partnerships deliver essential inputs to lowering the cost of energy for all business sectors and consumers.
American companies in Europe stand ready to contribute to the reimagination and reinvigoration of the region’s competitiveness. This will only be possible with strong political commitment and immediate action. Otherwise, the EU risks failing to translate the current strong rhetoric on competitiveness into reality.