World News

cross-posted from: https://lemmy.sdf.org/post/49236801

The original link is in German. This is a paraphrased automated translation with minimal edits.

Europe’s rules-based trade is an advantage in the global economy. Where toughness towards China is needed and why innovation decides the prosperity of the EU, explains economist Achim Wambach, President of the Leibniz Centre for European Economic Research (in German: Leibniz-Zentrum für Europäische Wirtschaftsforschung, ZEW) in an interview.

Question: We have the largest market in the world in terms of population. 450 million people live and consume in Europe. In the US, it is only 350 million. Do we have to hide at all?

Achim Wambach: No, I don’t think we have to hide. Take the figures for Germany: About ten percent of our trade is with the US, about ten percent with China. This means that 80% of our trade takes place elsewhere. I think that is also our homework: Someone has to take care of that 80 percent.

Around 40 percent of this is accounted for by Europe - keyword European Single Market. The question is: How do we get more out of there? Because there are still many barriers that we have built ourselves and that we could also dismantle ourselves. The other 40 percent is in the rest of the world.

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This is precisely Europe’s strength, which we often misinterpret as a weakness: we are rules based. With the Mercosur agreement, for example, the South American partners do not have to be afraid that a president will suddenly impose punitive tariffs of 50 percent because something politically does not suit him. A Commission President like Ursula von der Leyen would not be able to do that.

This rules-based WTO [World Trading Organization] trading system creates reliability. It ensures that investments in partnerships with Europe are worthwhile. This is a real strength that Europe could play out even more offensively - especially compared to the USA and China, where we are witnessing increasing political arbitrariness. There, companies must constantly fear that new rules will jeopardize trade overnight. This is not the case in Europe.

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[Toward the U.S.], limits must be clearly defined [...] For example, I can report from science that many players are currently heavily oriented towards Europe. The social and political pressure in the US is enormous. Europe benefits from this in some way. Studies also show that Europe is not the loser through trade diversions: Our tariffs are comparatively low, so Europe can step in for other regions.

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The situation in China is much more problematic. China is massively subsidizing its companies, flooding markets. We have already seen this in the solar sector: European companies have been displaced. There is a real risk that this will happen again – for example in the case of e-mobility. In such cases, there are good reasons for introducing temporary and WTO-compliant protective tariffs. Not as isolation, but to give young, not yet established industries time to develop.

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[Regarding setting limits toward the USA], Europe has understood the wake-up call: defence spending is rising massively. Now Europe has to show what is in it - in particular that cooperation works and not every country cooks its own soup.

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In terms of tariffs alone, Europe is doing comparatively well, the effective burden is low. But the concern is that further demands will follow – for example on digital regulation or on geopolitical issues such as Greenland. Then Europe must make it clear: We made this deal, but we also have our own interests that we defend. In future, Europe must be more confrontational on such issues. . [...]

The current [European] policy is very defensive and strongly focused on the past: which industry is becoming weaker? But the crucial question is: where do we stand in ten years? Technological sovereignty means being a technology leader in ten years. Wealth comes from innovation - not from interchangeable goods. And the EU still has a lot to do here.

Our funding programmes are strongly geared towards production, but too little towards innovation. At the same time, we keep putting obstacles in the way of start-ups and established companies: high tax burden, high levies for skilled workers, low flexibility in the internal market. Good specialists prefer to go to the USA or the UK.

All this slows down innovation. The central question must be: How do we take the innovation landscape in Europe to the next level? This is one of the most important levers for the future.

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