Search

Begin New Search Topic European Union Author Oscar Guinea

11. Keeping Up with the US: Why Europe’s Productivity Is Falling Behind

Author:
Fredrik Erixon, Oscar Guinea, and Oscar du Roy
Publication Date:
05-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The European Union stands at a crossroads. For decades, the EU’s productivity growth has consistently lagged the United States, leading to slower growth in living standards and decline in global economic power. While short-term factors like the strong US fiscal expansion have widened the gap in nominal GDP growth in recent years, the fact is that Europe has trailed the US economic development for several decades and the root of the problem lies in deeper structural issues within the European economy. Four major forces fuel this productivity divide. Firstly, the EU’s investment in research and development (R&D) pales in comparison to the U.S., leading to fewer patents and a slower pace of technology-fuelled innovation. Secondly, Europe trails America in the stock and growth of intangible capital investments, which are crucial for adopting and diffusing new technologies that drive productivity. Thirdly, the EU market exhibits slower business creation and destruction compared to the US. This rigidity hinders the flow of resources towards the most productive firms. Lastly, despite boasting higher levels of trade openness, the EU attracts less Foreign Direct Investment (FDI) than the US, curbing its access to cutting-edge global technologies and expertise. To close the gap, European policymakers should implement a comprehensive strategy for faster productivity growth. The first step is turning up the dial on R&D spending, targeting 4-5 percent of GDP by 2040. Next, Europe should prioritise investments in intangible assets and lay down the digital infrastructure that will underpin future growth. Revitalising the single market is also crucial: reducing internal and external market barriers for services, the primary vehicle for trading intangible assets. Moreover, the EU should foster a market environment that encourages entrepreneurship and facilitate the entry and exit of firms so resources cascade towards the most productive sectors. By harnessing the strengths of the single market and implementing these recommendations, European policymakers can propel the EU towards a more competitive and prosperous future.
Topic:
Markets, European Union, Productivity, and Economic Competition
Political Geography:
Europe, North America, and United States of America

12. Securing Europe’s Future: Strengthening ICT Competitiveness for Economic and National Security

Author:
Fredrik Erixon, Oscar Guinea, and Dyuti Pandya
Publication Date:
12-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Europe’s Information and Communication Technology (ICT) sector, including ICT manufacturing such as telecom equipment and electronic components, as well as ICT services such as software, telecommunication services, and data processing, is no longer merely an economic pillar but a strategic asset essential for national security and defence capabilities. This paper identifies two concerns linking technology and national security: the exploitation of ICT as a gateway to critical infrastructure and the weaponisation of trade and technological dependencies in ICT by foreign nations. Addressing these two challenges requires tailored approaches, as they involve distinct nations and contexts. First, the EU should reduce its reliance on Chinese telecom equipment within its networks and accelerate the deployment of 5G. While phasing out Chinese telecom equipment will take years, a faster rollout of 5G can be achieved in the short term. To accomplish this, the EU should promote the scale and profitability of its telecom operators. Secondly, the EU relies heavily on US companies for a substantial share of its cloud-based online services. However, it is unlikely that the US would impose restrictions on these exports to the EU. Furthermore, replicating the infrastructure needed to deliver cloud-based online services would entail significant costs. To achieve technological leadership, the EU must prioritise emerging technologies such as 6G, XG, AI, quantum computing, and edge and hybrid computing, which will form the foundation of future commercial and military innovations. Thirdly, the EU should strengthen its leadership position in the development of technologies for advanced mobile communication, including 5G, 6G, and XG. Through significant effort and investment in R&D, European companies have secured a leading role in developing technical standards for cellular communication and telecom equipment. Large European firms such as Ericsson and Nokia, as well as EU SMEs that are champions in their fields, are among the most significant contributors to the technological standards. This hard-won position is one that EU policymakers must do their utmost to protect and develop. However, complacency is a recipe for disaster. The EU has the potential to foster companies that could lead in the technologies of tomorrow. It possesses the necessary fundamentals to drive technological innovation in the ICT sector, including high levels of human capital, firms operating at the technological frontier, and a market economy underpinned by strong institutions, the rule of law, and robust intellectual property protections. These constitute Europe’s comparative advantages, and the EU must adopt policies that recognise and reinforce them, rather than undermine them.
Topic:
Defense Policy, National Security, European Union, Digital Economy, Trade, and Competition
Political Geography:
Europe

13. The Economic Dividend of Competitiveness

Author:
Fredrik Erixon, Oscar Guinea, Philipp Lamprecht, Elena Sisto, and Erik van der Marel
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
In a world of technological and economic rivalry, the EU must devote increased attention to its competitiveness. Higher levels of competitiveness will help the EU build a more prosperous economy which will in turn produce innovation and resources to address the great challenges of our time. ECIPE published a study presenting a competitiveness compass with concrete policy recommendations that will improve EU’s competitiveness. These policy recommendations, once implemented, will bring tangible benefits to the EU economy in the form of higher levels of trade and productivity. This report presents five scenarios in which the EU pursues competitiveness policies that lead to higher economic growth.
Topic:
Economics, Science and Technology, European Union, Economic Growth, and Competition
Political Geography:
Europe

14. In Support of Market-Driven Standards

Author:
Matthias Bauer, Fredrik Erixon, Oscar Guinea, and Vanika Sharma
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The EU published its new Standardisation Strategy in 2022. The strategy contains some good ideas to improve the way European standards are set. However, in its attempt to gain more control over technical standards, the EU risks killing the goose that lays the golden egg. The primary motivation behind the strategy is the belief that the process governing the way CEN, CENELEC, and ETSI – the three European Standardisation Organisations – take decisions over EU standards favours non-EU multinationals. To address this perceived imbalance, EU National Standardisation Bodies will have the exclusive power to accept standardisation requests, and adopt, revise and withdraw European technical standards. These changes are particularly significant for ETSI, Europe’s Standardisation Body in charge of telecommunication standards and one of Europe’s most successful organisations. ETSI is a prime example of EU normative power since it hosts companies from more than 60 countries, while retaining a large membership of EU firms. The regulatory changes included in the strategy are not risk-free. There could be unintended consequences that may undermine a standardisation system that has delivered significant economic benefits for the EU and the world. First, giving more responsibility to EU’s National Standardisation Organisations will turn a European discussion into 30 (EU and EEA) national debates. As a consequence, small companies will not be able to contribute to each and every one of the National Standardisation Organisations, diluting their contribution, while multinational companies, with the resources needed to cooperate with a larger number of bodies, will benefit from an expanding role in the EU standard setting process. Second, if standards are fragmented along national borders and companies must multiply their efforts to take part in several Standardisation Development Organisations, there will be less resources for Research and Development spending. Finally, if each and every National Standardisation Organisation needs to have a position with regards to the acceptance of a standardisation request, or adoption, revision and withdrawal of European technical standards, the time period required to adopt a technical standard may be extended rather than shortened, which is the exact opposite of what the European Commission wants to achieve. The regulatory changes included in the EU Standardisation Strategy are akin to cracking a nut with a sledgehammer. If the European Commission is concerned about the influence of non-EU companies in European Standardisation Bodies, it does not need to overhaul their governance systems. Supporting greater participation of European firms in the European standard system will ease EU’s concerns without the downside risks associated with changing the rules of the game that govern Europe’s Standardisation Bodies. The success of the European standardisation system, which is market-driven and based on consensus, has had significant economic benefits in the development of specific industries, like the European Information and Communication Technologies (ICT). Technical standards in ICT have shaped a European industry that is not only dynamic and international but also enjoys some of the highest levels of wages and Research and Development spending. Moreover, if technical standards are not developed through an open, consensus-based, and industry-led voluntary process, they will be developed in different ways. For instance, governments and private companies can develop standards by themselves. Both solutions are inferior to the current market-driven approach that governs European standards. However, the European market-driven approach to set standards is voluntary, and its success and continuation must not be assumed. European policymakers should be worried about tinkering with a European standardisation system which has produced economic specialisation and innovation to the benefits of EU firms and consumers.
Topic:
Markets, European Union, Regulation, Economy, and Standardization
Political Geography:
Europe

15. Reforming Standard Essential Patents: Trade, Specialisation, and International Jurisprudence

Author:
Fredrik Erixon and Oscar Guinea
Publication Date:
04-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The European Commission is considering a radical overhaul of the system governing Standard Essential Patents (SEPs). A leaked proposal suggests that the Commission wants to take control over the registration of SEPs, take efforts to regulate their essentiality, and intervene in negotiations over royalty rates if parties do not come to an agreement. The underlying assumption is that such a system will benefit SEP implementers and the European economy, and that the common holders of SEPs will be cut down a size or two. The logic behind this policy is that, since there are more SEP implementers than holders, any change in favour of implementers will have a net positive effect on the EU economy. However, this is doubtful. The EU is a R&D powerhouse for many of the technologies protected under SEPs and since most of the global production of the goods using these technologies is done outside Europe, the EU is a net exporter of innovation and a receiver of revenues from the licensing of these technologies. Using data on trade, specialisation, and market revenues, this paper comes to a different conclusion: the EU economy is likely to be a net loser if the balance between holders and implementers is changed. Moreover, there is a general and fundamental interest for Europe to preserve a system of standards and SEPs that allows it to punch above its weight in international policies and practices in standards and patents.
Topic:
Reform, European Union, Trade, Patents, Specialization, European Commission, and Jurisprudence
Political Geography:
Europe

16. Strategic Autonomy and the Competitiveness of Europe’s Innovative Pharmaceutical Sector: A Wake-up Call

Author:
Fredrik Erixon and Oscar Guinea
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
It is high time for Europe to break its relative decline in the pharmaceutical sector. Europe used to be the preeminent region in the world for Research and Development and innovation in the sector – being the location for a majority of R&D and the development of new medicines. However, its competitiveness has been going down for several decades – and, in more recent time, the pace of the decline is now accelerating. Europe is not just outpaced by the United States. Unless there is a new direction, China will soon be ahead of Europe too. Europe is behind the global frontier in innovation and new product development in medicines. It is not just Europe’s share of global R&D that is going down. Of all the new chemical and biological entities that are developed, Europe is contributing a falling share. There is a similar development in the drug pipeline – medicines that are in the regulatory approval process. The location of clinical trials for Advanced Therapy Medicinal Products – an area of new frontline drug development – is moving out of Europe. If Europe is to improve its strategic autonomy and restore competitiveness in the pharmaceutical sector, better policies are needed to incentivise innovation and attract R&D investment. A new strategy for the pharmaceutical industry should include – among other things – better protection of intellectual property, more and focused R&D expenditures, and streamlined regulatory and reimbursement processes.
Topic:
European Union, Pharmaceuticals, Strategic Autonomy, Research and Development, and Competition
Political Geography:
Europe

17. Trade and Competitiveness: Putting the Firm at the Centre of the Analysis

Author:
Lucian Cernat and Oscar Guinea
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The European Commission published its communication for the long-term competitiveness of the EU. Trade and Open Strategic Autonomy were among the selected policy areas that will drive EU competitiveness in the future and trade with the rest of the world as a share of EU Gross Domestic Product (GDP) was the selected indicator to measure progress. This Policy Brief proposes a new set of indicators that complement this and similar indicators that focus on the value of trade. Using the Trade by Enterprise Characteristics (TEC) database, this paper produces indicators that measure the number of exporters, non-EU suppliers, non-EU customers, and foreign companies. By putting the firm at the centre of the analysis, these indicators offer insights that complement policy-makers’ views on trade and competitiveness.
Topic:
European Union, GDP, Trade, Strategic Autonomy, European Commission, Economic Competition, and Competition
Political Geography:
Europe

18. If the EU was a State in the United States: Comparing Economic Growth between EU and US States

Author:
Fredrik Erixon, Oscar Guinea, and Oscar du Roy
Publication Date:
07-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
This Policy Brief is a warning call about Europe’s poor economic growth and its consequences for prosperity. The long-term trend of Gross Domestic Product per capita is crucially important but not always easy to grasp. While it’s common to compare levels of growth between countries in a single year, the reality is that it is the long-term trend that matters. An economy that grows at 3 percent per year will double in 24 years but an economy that grows at 1 percent per year will double only in 48 years. For a long time now, the average growth rate in mature and developed European economies has been closer to 1 than 3 percent. The EU has had positive economic growth but it has been slow in comparison with other developed economies. If European countries were states in the United States, many of them would belong to the group of poorest countries. In this Policy Brief, we rank GDP per capita in EU countries and US states, and the result is dispiriting. The ranking of GDP per capita in 14 EU member states, which together represented 89 percent of EU GDP, was lower in 2021 than in 2000. For instance, France and Germany were as rich as the 36th and the 31st US states in 2000, but twenty-one years later, French GDP per capita was lower than the 48th poorest US state, Arkansas, while German GDP per capita had fallen to become as prosperous as the 38th US state, Oklahoma. GDP per capita in Central and Eastern European countries have grown considerably but their relatively small size and lower starting point stop them from reverting the trend of relative European economic decline. The result of this economic divergence between EU member states and US states is a growing wedge of GDP per capita between the EU and the US, which in 2021 was as large as 82 percent. If the trend continues, the prosperity gap between the average European and American in 2035 will be as big as between the average European and Indian today. This Policy Brief tells a story about the EU’s unfulfilled economic potential but also offers a ray of hope. If the US states have managed to sustain robust rates of economic growth, the EU member states can do it too. However, to do so the EU must bring back economic growth and competitiveness to the centre of its economic policy. If Europe is to face the challenges presented by climate change and the digital transition, the growing burden of an aging society and defence budgets, higher economic growth is not an option but a necessity.
Topic:
European Union, GDP, and Economic Growth
Political Geography:
Europe, North America, and United States of America

19. European Economic Security and Access to Critical Raw Materials: Trade, Diversification, and the Role of Mercosur

Author:
Oscar Guinea and Vanika Sharma
Publication Date:
07-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Access to secure and stable supply of critical raw materials (CRMs) is vital for Europe’s economic security. These raw materials, which are indispensable inputs for Europe’s modernisation, are supplied by a handful of countries. Among them, China and Russia are two of the most important European suppliers of CRMs. This dependency leaves the EU exposed to Chinese and Russian policies that may harm Europe’s economic and political interests. The European Commission has recently proposed a Critical Raw Materials Act with the objective of increasing domestic production of strategic raw materials (SRMs) – a subset of CRMs vital for the energy and digital transitions. However well-intentioned, most of the policies in the Act – which aim at producing more SRMs in Europe – are a red herring. While the EU needs to reduce its vulnerable dependence on some countries, the politics about the supply of CRMs have become hostage to manufacturing fetish, import-substitution ideas, and companies who want governments to subsidise their investments and growth. In reality, getting substantial amounts of Europe-produced SRMs to market will take years – if not decades – and new mines will face significant legal and environmental resistance. It is simply not realistic to expect that higher domestic production in the EU will reduce Europe’s current dependency on imported SRMs anytime soon. If it is economic security and reduced vulnerabilities that Europe wants, a different strategy is needed. There is a better alternative. Trade dependencies of CRMs can only be fought with more trade. One option exist already: the EU could diversify its supplies of CRMs away from China and Russia by trading more with other exporters of CRMs. Mercosur is an obvious partner to achieve this goal. Brazil, a member of Mercosur, is the largest supplier of SRMs to the EU by volume and the Mercosur countries are democratic market economies that are seeking deeper relations with Europe. To encourage trade and investment in CRMs across both regions, the EU-Mercosur Association Agreement includes binding provisions that will place the bilateral trade and investment relations under a more certain institutional arrangement. Other policies, such as those included in the EU’s CRM Act, can only complement but not substitute for a trade-oriented strategy to improve the structure of SRM supply.
Topic:
Treaties and Agreements, European Union, Trade, Economic Security, Mercosur, and Raw Materials
Political Geography:
Europe

20. The EU Digital Markets Act: Assessing the Quality of Regulation

Author:
Matthias Bauer, Fredrik Erixon, Oscar Guinea, Erik van der Marel, and Vanika Sharma
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The proposed Digital Markets Act (DMA) is an opportunity to prevent and remedy anti-competitive conduct by large digital platforms. If the Act is designed in an adequate manner to target specific problems, it can improve the contestability of platform services markets and markets that rely substantially on digital services. However, the DMA takes a novel approach to regulation, and novelty in concepts and regulatory requirements can lead to outcomes that later have to be corrected. Fortunately, the EU is not alone in experimenting with new regulations that specifically target the market power of large digital platforms. There is a great scope for policymakers to learn from similar frameworks in Europe and the United States. In this study, we compare key parts of the DMA proposal with similar legislation implemented or proposed in Germany, the United Kingdom and the United States –– in light of established principles for good regulatory design. We analyse the structure and quality of these regulations, not if they go in a certain ideological, political or commercial direction. We find that there are some areas where the EU could learn from other proposals to make the DMA more fit for purpose, and avoid unintended consequences on Europe’s economy.
Topic:
European Union, Regulation, Digital Economy, and Digital Markets Act (DMA)
Political Geography:
Europe