Europe in the global economy: Surprising external strength amid domestic weakness

Daniel Gros is director for the Centre for European Policy Studies and a member of the World Economic Forum’s Global Agenda Council on Europe says, "EU has maintained its share in global exports over the past decade, whereas other mature economies have seen theirs decline considerably, most notably the US and Japan.

The EU exports almost three times as much to the fast-growing BRICs than the US does. In fact, the EU has increased its exports much more than the US over the last decade, and this holds true whether one looks at exports of goods, services or manufacturing. The performance of the EU is particularly striking in the latter, where exports have increased by about 150%, compared to about 50% for the US.

But it is services that could emerge as Europe’s hidden champion. It is widely assumed that Europe is not competitive in this market – numerous studies have shown that services are the sector in which productivity performance in the EU has been weakest and that the continent has been comparatively slow in adopting information technologies.

In reality Europe’s exports of services are performing well. Here, too, the EU has outperformed the US, whose exports have increased by 100% over the last decade, compared to Europe’s 150%. In 2011 extra-EU exports of services amounted to over €570 billion, 40% higher than those of the US.

That the EU is competitive in services can also be seen from the fact that it is continuously recording a surplus, which rose to about €100 billion in 2011. This strong trading position is astonishing, since services constitute the sector in which productivity growth in the EU has been most disappointing (both in absolute terms and relative to the US).

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