Given the stakes, Brussels policy circles are now abuzz with recipes for economic competitiveness. But beneath the surface, these appear to be driven by opposing ideological views: On the one hand, there’s the established liberal view, which sees free trade and competition policy as key for competitiveness, while perhaps acknowledging that the need for economic security may justify a higher degree of public intervention than usual.
On the other hand, there’s the interventionist view, which pushes the need to overcome the established model in order to face the brave new world of geoeconomic and industrial competition. This means, state control of strategic industrial sectors, watering down competition policy and using trade policy instruments — like tariffs and foreign direct investment restrictions — to protect Europe’s market.
This new debate is thus deeper, more complicated and more divisive than in previous incarnations. Competitiveness needs to be reconciled with the new challenges of today’s world, including economic security, decarbonization, shrinking fiscal space and economic nationalism in China, the U.S. and other trading partners.
And for Europe to navigate all this, we’ve come up with a few principles that would make a good place to start:
First, the only way for the European Union to develop an effective economic competitiveness agenda is to leverage its greatest asset: the single market.
Only a well-functioning, globally linked EU market will be able to achieve a similar scale to the domestic markets of the U.S. and China. Fragmented national measures won’t lead to private investment at the scale Europe needs if it’s to become globally competitive in future key technologies, such as batteries or electric vehicles.
