Barroso highlights ‘amazing’ globalisation gains

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Globalisation is all too often blamed for “unrelated” job losses and price hikes, while the “huge benefits” of increased cross-border trade and investment such as higher wages and GDP growth are overlooked, said the Commission President, commenting on a new report.

According to the study, commissioned by the American Chamber of Commerce to the EU and drafted by the Johns Hopkins University’s Centre for Transatlantic Relations, the gains reaped by the EU as a whole in relation to globalisation are far larger than the “pains”, although it underlines that the continent’s diversity means certain “small and concentrated” groups are hit harder than others. 

Despite the rise of new economic powers, Europe has held its ground and in fact succeeded in raising its share of world exports from 40.8% in 2000 to 42.1% in 2006 by tapping into new demand from developing-country markets. 

It has also continued to attract steady investment flows, notably from the United States, which still invests substantially more in European countries than it does in China, India or any South American nations. 

  • A diverse picture 

European countries differ widely in their ability to cope with globalisation, the study concedes. While some are “driving global innovation and competing at the highest end, others are competing head on with rapidly-developing economies,” it notes. In fact, only 14 EU countries currently rank higher than China in terms of global competitiveness while some are even behind Russia and India. 

According to OECD figures, 11 EU countries currently lack the necessary labour market flexibility and skill levels to cope with globalisation. Germany, Ireland and France are “just below the break-even line,” while countries like Poland, Greece and Italy are even worse off. “Those back in the pack have some cause to worry,” the authors said. 

  • Growing skills shortages 

A key issue for Europe is its eroding skills base. With its ageing and shrinking population, its lack of incentives for companies to train workers, and its stringent citizenship laws, “the EU is fast becoming a magnet for the skilled, rather than the unskilled,” said Daniel Hamilton, who co-authored the report. 

Indeed, while the EU succeeds in attracting 5% of skilled workers from developing countries, the US in turn draws in 55% of these intellectuals. Barroso said he hoped that the EU’s new ‘Blue Card’ proposal would help.

  • Services – a “sleeping giant” 

In order to cope with globalisation, the EU must capitalise on its strengths, the study states, adding: “Every EU household would gain over €5,000 annually if Europe seized the opportunities offered by the present phase of globalisation.” 

Key areas offering potential in the future include services – an area currently accounting for 70% of EU jobs yet just 23% of exports – and climate technologies. 

  • Off-shore fears exaggerated? 

According to the report, fears that European jobs are being off-shored to low-cost countries, fuelling high unemployment levels in the bloc, are exaggerated. “A job gained abroad does not mean a job lost at home,” stressed both the authors and Barroso. 

Between 2003 and 2006, just 8% of all job losses were related to delocalisation, of which the majority are in fact being “near-shored” to other EU members, mainly in central and eastern Europe, the report states. 

What’s more, it argues, relocalisations actually help to improve companies’ competitiveness, thereby enabling them to invest more in new technologies and business ideas that will create new jobs, while Europe in fact onshores more jobs than it offshores. 

Offshore “losers”, it underlines, “are a small and concentrated group hit hard, relative to the much more numerous and diverse group of winners from offshoring and offshore outsourcing.” They are mainly found in the manufacturing sector, as well as in banking and computing operations. 

"Europe has been a huge winner of globalisation so far," said Joseph Quinlan,  who co-authored  the "Globalisation and Europe: Prospering in the New Whirled Order" study. He dismissed the idea that the strength of the euro could change the generally positive outlook for the EU, saying: "It is an issue, but at the end of the day, infrastructure costs, labour costs, productivity and innovation matter more". 

European Commission President José Manuel Barroso welcomed the publication of "hard facts" strengthening the case for globalisation. "Fears are sometimes legitimate […] because the benefits of globalisation have not been shared equally by all," he said. However, he added that such fears were "often unfounded as there is a tendency to blame it for problems – like unemployment or rising prices". 

"For every job that Europe has lost to economic change in the last two decades it has created at least one new one in more competitive parts of the economy," Barroso stressed. He said a change in perceptions was needed to highlight some of the "amazing" successes of globalisation, singling out France as an example: "Do the French people know that they have some of the best global companies in the world?," he asked. 

But trade unions have criticised the EU for failing to ensure that the benefits of globalisation in industrialised countries accrue equally to all participants: "Governments thus far have failed to manage globalisation and have failed to assure that workers participate equitably in the benefits of economic growth," argued European Trade Union Confederation (ETUC) General Secretary John Monks, adding: "The benefits of globalisation in the industrialised countries have accrued disproportionately to the wealthiest families, while the majority of working families are excluded."

Although historically, Europeans have been big winners of globalisation, many see the rise of new economic "superpowers" able to exploit lower labour costs and standards, such as China and India, as a threat to their livelihoods. 

Faced with growing protectionist calls across the continent, the Commission agreed, in December 2005, to set up a European Globalisation Adjustment Fund, aimed at helping countries cope with restructurings and job losses caused by intensified competition from low-cost countries, and convincing citizens to support trade opening. The fund was launched in January 2007. 

In December 2007, EU leaders adopted a declaration on a common strategy for responding to the challenges posed by globalisation, which calls on member states to reject protectionism and focus instead on "shaping globalisation" by breaking down trade barriers in third countries and demanding reciprocity. 

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