Sunday 12 November 2017

Fair, competitive and resilient: EU responds to globalisation

The blog post Reflection paper on globalisation: Opportunity or threat?, which  introduced the European Commission’s reflection paper on harnessing globalisation COM(2017) 240, left me with a desire to present the reasons of the Commission and how it wants to handle the internal and external pressures of globalisation, as part of the discussion about the future of Europe - #FutureOfEurope on Twitter.

Profound changes

We may be well or ill prepared, but profound changes await us. As the EU Commission writes about our interconnected future (page 11):

We are still in the early phase of the transformation where digitalisation, robots, artificial intelligence, the internet of things, 3D printing will revolutionise how we produce, work, move and consume.

The UK and the USA have both upset long traditions of integration, European and global. China increasingly acts like an economic and a military great power, but not based on the values of democracy, human rights and the rule of law many of us believed were becoming universal.

In the emerging tri-polar (or multipolar?) world, the relative weight of Europe in world affairs continues to decrease, to say nothing about the dwindling relative size of individual EU member states (page 12):

In 2025, 61% of the world's 8 billion-population will be in Asia, predominantly in China and India. Europe's relative share of the world population will decline, with the EU27 accounting for 5.5 %. This may bring about a multipolar world order with different political, technological, economic and military powers. But it also means large new markets for European companies.

Isolationism and protectionism - closing minds and borders, building physical and mental walls, creating obstacles to trade and investment - may entice individuals, communities, regions and countries feeling left behind, but the relief is shortlived (page 14):

Changes associated with globalisation can lead to calls for countries to isolate and insulate themselves from what is happening around them. This is particularly acute in regions that have been left behind. Some want to put up barriers and close borders.  
However, a majority of European citizens recognise that protectionism does not protect. It may provide short-term relief, but history shows that it never had lasting success, and has often led to disastrous outcomes.
Protectionism would disrupt production and increase costs and prices for consumers. European exports would become less competitive putting even more jobs at risk. An increase in trade restrictions by 10% is estimated to lead to a 4% loss of national income. We would lose access to new products, services, technologies and ideas. By hitting the poorest hardest with price increases, protectionism would have the opposite of its desired effect.

Harnessing globalisation

In a nutshell, for the sake of the citizens of Europe and the world, the Commission sketches the road to follow (page 14):

To better harness globalisation, we need more global governance and global rules. And we need to support that with domestic policies that boost our competitiveness and resilience at home.

Chapter 3 about the EU’s external response is dedicated to promoting a fairer international economic order (pages 15-18). Chapter 4 deals with the internal response of the EU: how to enhance innovation and competitiveness, as well as to bolster the resilience of those who otherwise fall behind (pages 19-23).

The thoughts about life-long learning and active labour market and social policies are closely related to the future of Europe reflection paper on the social dimension, the European pillar of social rights to be proclaimed and the Social Summit for Fair Jobs and Growth the coming week, 17 November 2017 in Gothenburg (Sweden). - For more information you can follow #SocialRights and #SocialSummit17 on Twitter.

EU level action

Individuals and firms make their own choices in a changing world, but the reflection paper is about how the political sphere should tackle globalisation. There are challenges for each political level - local, regional, member state and EU - as summarised on page 24.

Here we are interested primarily in a sketch of how the EU institutions should should invest their time and energy regarding globalisation:

  • Trade agreements to open markets and enforce level-playing field
  • Measures to ensure global tax justice and transparency
  • Promotion of higher global regulatory standards
  • Trade Defence Mechanism
  • European Budget (such as EFSI, ESIF, GAF, Horizon)
  • European External Investment Plan
  • Development Assistance
  • Product and Food Safety  

If this succeeds in inviting blog followers to read about the EU’s external and internal responses to globalisation - fair, competitive and resilient - it may be better to continue with the expert assessments I promised in a separate blog post.

Ralf Grahn

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