Policy Paper 83
 

Europe’s Trade Strategy: Promise or Peril?

Richard Youngs, Director, Fride and John Springford, Research Fellow, Centre for European Reform (CER) ? Europe’s growth strategy is based on a larger trade surplus with the rest of the world, to make up for slow domestic growth, as consumers are weighed down by debt. Therefore, Member States have pursued commercial diplomacy, with foreign ministries organising trade fairs, brokering sales of energy, transport, and arms equipment, and in some cases making bilateral trade deals, undercutting EU efforts. Governments are doing everything they can to drum up export growth, especially in emerging economies. This strategy is unlikely to make Europe richer in either the short or the long term. The continent’s short-term problem is a lack of domestic demand: overall exports to the rest of the world would have to grow at an unlikely pace to offset it. The continent’s long term problem is a slow rate of productivity growth. More competition between Europe’s firms is more likely to raise productivity, and with it living standards, than a government-sponsored export drive.

|   12/03/2013             |   John Springford             |   Economics and finance
Policy Paper

This Policy
Paper is a contribution of John Springford (Centre for European
Reform) and  Richard Youngs (FRIDE), to the project Think Global – Act European (TGAE). Thinking strategically
about the EU’s external action
directed by Notre Europe –
Jacques Delors Institute
(report available in May 2013, dir. Elvire Fabry, Senior Research Fellow, Notre
Europe – Jacques Delors Institute).

Europe’s growth
strategy is based on a larger trade surplus with the rest of the world, to make
up for slow domestic growth, as consumers are weighed down by debt. Therefore, Member
States have pursued commercial diplomacy, with foreign ministries organising
trade fairs, brokering sales of energy, transport, and arms equipment, and in
some cases making bilateral trade deals, undercutting EU efforts.
Governments are doing everything they can to drum up export growth, especially
in emerging economies. This strategy is unlikely to make Europe richer in
either the short or the long term. The continent’s short-term problem is a lack
of domestic demand: overall exports to the rest of the world would have to grow
at an unlikely pace to offset it. The continent’s long term problem is a slow
rate of productivity growth. More competition between Europe’s firms is more
likely to raise productivity, and with it living standards, than a
government-sponsored export drive.

Before the publication of the final report presenting the key recommendations of the 16 think tanks involved in the project, 5 series of policy papers address the following key challenges: migration, EU neighbourhood, CSDP, strategic resources and economic policy .

This Policy Paper is part of the series entitled “Promoting EU economic interests abroad” which
includes contributions by Pawel Swieboda (demosEuropa), Agatha Kratz and Jonas Parello-Plesner (ECFR) , Daniela Schwarzer (SWP), Federico Steinberg (Elcano), Diego Valiante (CEPS),Yiannis Tirkides ( CCEIA), Filippa Chatzistavrou and Dimitris Katsikas (ELIAMEP).

Go to the other contributions of the economic policy series >>

This project is led with the contribution of