Presenting a report commissioned by the American Chamber of Commerce to the EU and drafted by the John Hopkins University's Centre for Transatlantic Relations, analyst Daniel Hamilton told US businessmen that the EU is a world-class trader and investor, but its future depends on its ability to utilise its extensive networks to leverage global growth, human talent and innovation.
"Europe 2020 is not a rhetoric exercise, it is a window of opportunity," Hamilton said.
Europe's health is sound despite the eurozone crisis, found the report. The EU is still the world's largest export bloc and a leading supplier of goods to developing countries. It is the largest trading partner of each of the BRIC countries (Brazil, Russia, India and China).
As for investment, the EU is the largest provider and recipient of Foreign Direct Investment (FDI) in the world, with intra-EU investment increasing rapidly. The EU invested 35% more in the rest of the world than vice-versa in the last decade and it records net positive income from FDI of around €75 billion.
Power to the people
But Europe's Achilles Heel is its people, said Hamilton, citing as justification its ageing population, shrinking workforce and an inability to attract skilled foreigners.
"Europe needs to double current net immigration to halt its population decline, triple it to maintain the size of its working-age population and quintuple it to keep worker/elderly ratios at today's levels," the US analyst claimed.
The scale of the challenge is considerable. Europe is already home to the largest number of migrants in the world, almost 70 million out of a reported 164 million worldwide: 42.6% of the total. However, Europe seems to have become a magnet for the unskilled, warns Hamilton.
Highly skilled foreign workers account for only 1.7% of all workers in the EU, compared to 9.9% in Australia, 7.3% in Canada and 3.5% in the United States. A massive 85% of unskilled foreign labour comes to the EU, while only 5% goes to the US.
These data should make Europeans think: indeed, they are "a wake-up call for Europe," said Shailendra Ghorpade, managing director of insurance giant MetLife, commenting on the report;s findings.
"Europe must act with a sense of urgency," added Ghorpade, slamming EU politicians lack of political will to pursue necessary reforms and speed up full implementation of the Single Market, where barriers still exist.
Hamilton set out again the recipe for success for Europe that he has been communicating in recent years: complete the Single Market, awaken Europe's sleeping giant – services – break the link between wealth production and resource consumption by promoting energy efficiency and renewable energies, innovate by investing massively in R&D, and tap the potential of its people by creating a pan-European talent strategy.
Last but not least, the EU should prioritise becoming a critical hub within the G20. This means, in Hamilton's words, leveraging high-growth opportunities in emerging markets and re-engaging in neglected markets, such as Turkey, Africa and Latin America.
"The more connected the EU is, the more competitive it is likely to be," said Hamilton, adding that EU leaders cannot afford to focus only on crisis management of the euro zone.
Wider Europe and transatlantic ties
By "connected" Hamilton was referring to the great potential of wider Europe — what he calls the China next door, a region stretching from North Africa across the Mediterranean, up through Turkey, and into Eastern Europe to Russia.
Turkey reported stunning GDP growth of 11.4% in the first quarter of 2010, second only to China, Hamilton pointed out. Yet despite Turkey's close ties with the EU, the country's trade is noticeably shifting away from the Europe towards its eastern neighbourhood, particularly Iraq and Iran.
"Europe seems fearful of its periphery, because of an enlargement fatigue, but it should not," Hamilton said, pointing out that if the EU's economy grew by 2% it would still create wealth equivalent to the GDP of Argentina.
The transatlantic relationship need deeper integration, added Hamilton, calling for an EU-US zero-tariff agreement. Such an agreement on trade in goods alone would boost the EU's annual GDP growth by up to 0.48% and add 1.48% in the US, he claimed, as well as bringing welfare gains of up to $89 billion for the EU and $87 billion for the US and boosting exports for both partners by 17-18%.
According to the report, aligning half of US-EU non-tariff barriers and regulatory differences would also push EU GDP 0.7% higher in 2018, boost EU exports by 2.1%, increase US GDP by 0.3% and boost US exports by 6.1%.
US diplomatic sources agreed that Europe was too preoccupied by the eurozone crisis and was not focusing enough on the long term, reiterating the need for a genuine EU-US partnership for innovation.